Carmax...Am I doing this right?

[ladyjaye82]

I bought a used Honda at Carmax in June 2014 for $16,237.00 at 6.4% The monthly payment was set to be $272.90. I have a thing about odd numbers so I rounded my monthly payment up to $280. I've been paying $280 for the last year and a half and I've noticed that each month the monthly minimum they're requiring is dropping. Right now it's saying I owe $125.10. I assume this means I'm on my way to paying my loan off early which I guess is a good thing because I'd love to save that monthly payment.

I guess my question is this....if I drop my payment down to what they're saying I now owe for the month will it stay at $125 until the original pay off date of June 2020? Or will it make it's way back up to the original $272? Probably a dumb question but I never experienced this with my ex-husband's car loan and this is my first car loan so I guess I just want to make sure I'm doing it right and that I'm not doing anything detrimental to my credit.

[mynameainttracy]

That means they are applying your extra each month to your next months payment, not the principal. This will not pay off your loan faster.

[ladyjaye82]

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@mynameainttracy wrote:
That means they are applying your extra each month to your next months payment, not the principal. This will not pay off your loan faster.

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So if they just apply it to the next month's payment is there nothing I can do to pay down quicker? If I'm stuck to be paying them until June 2020 do I have any other recourse than to hopefully refinance?

I guess I'm just at a loss because at some point if I'm paying them more and they're applying it to the next month's payment won't that bring me down to a $0 monthly payment at some point? Sorry, I realize this is a pretty dumb question.

[mynameainttracy]

If you paid that payment of $125 then the next month it would go back to your original pmt amount. You need to talk with your lender and find out how to make the payment so that the extra goes to principal. Not all lenders do it the same, for example on my husbands loan we do what you do and it is automatically applied to principal without telling them. This will help you get the principal reduced a little more quickly.

[ladyjaye82]

Actually I just looked on my account history and it appears it's already going to the principal. Am I still misunderstanding?

[incognitony]

You are basically paying an extra 7 bucks a month so you might save a couple months at the end if you keep doing that. You are saving a few dollars on interest but it would be minimal savings.