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Extra payments on auto loan

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CreditMulligan
New Member

Extra payments on auto loan

So I was wanting to start throwing some additional payments to my Cap 1 auto loan. A friend told me that you just have to let the loan run for awhile with the agreed upon terms before doing extra chunks. He says the lender likes to see that you can pay as agreed. So my loan hit the year mark this month, is the aforementioned statement true and if so is one year long enough to wait to show that I can pa as agreed and now I want to knock it out a little faster?
Message 1 of 9
8 REPLIES 8
CreditMulligan
New Member

Re: Extra payments on auto loan

Kept reading and don't know how I missed it but a similar question was asked, I guess it is a common story about letting it run out as agreed?
Message 2 of 9
kayvee_
Regular Contributor

Re: Extra payments on auto loan

Do you mean extra principle payments? I know Honda Finance lets you do it. I would call the lender and see what their policy is. 

Message 3 of 9
Dustink
Valued Contributor

Re: Extra payments on auto loan

Pay as much as you can as often as you can. 

 

Paying the minimum sounds like a myth created by the banks to get more money in interest.

 

There is no need to wait. Pay as much as you can to reduce interest charges. The faster you pay it off the less you will have to fork over in finance charges.

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Message 4 of 9
HoldingOntoHope
Valued Contributor

Re: Extra payments on auto loan

Capital one will accept additional payments in any amount over the monthly minimum at any time. Their statements to you will show the money being applied to the next payment due, so if you pay ahead enough they may not show a payment due for one or several months ahead. But if you just keep making at least the required monthly payment then the net effect is to reduce the loan term and thus the total interest paid.

 

This is a sound financial plan but has the added benefit of allowing you to skip a payment if one of those unexpected life events comes around. Assuming of course that you are at least one payment ahead.

Best financial advice I ever got: "Just imagine what an adult would do and do that."

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Message 5 of 9
jackg
Established Contributor

Re: Extra payments on auto loan

Pay it off ASAP. My car loan payment at ALLY is about $350/mo but I pay $750/mo.

FICO scores on November 17, 2014 (prior to applying for and being approved my mortgage)

EX=738
EQ=735
TU=754

FICO scores on March 4, 2015 after being approved for mortgage and buying the home, the mortgage isn't yet reporting.
EX- 689 EQ- 739 TU- 739
Message 6 of 9
Dapper_Dan
Contributor

Re: Extra payments on auto loan

Pay pay pay!

 

For Cap1, if you add an extra $100 on your monthly payment, it will only apply to next month's principal and interest payment.  Meaning, as I learned the hard way, you can pay only as much as 3 monthly payments and it will all apply to principal AND interest and your next car payment wouldn't be due for 3 months.

 

There is no advantage to paying extra on your regular payment.  The only way to make your extra funds apply to principal only is to call Cap1 and tell them you want to make a "principal only" pamynet over the phone.

 

There is no charge and no penalty with Cap1 for making a principal only payment.  You must be current on your loan to do this.  If you only pay extra via your regular montly payment, you are not going to get the same results as calling in a principal only payment.

 

In my case, my car paymnet is not due until December 2013, but I still call in each payday and make a principal only payment.  This will not only reduce my payoff immediately, it will also reduce the amount of interest that accrues until the next payment due date of December 2013.

 

There is no disadvantage to making a principal only payment.  You end up saving money AND your utility will decrease AND your car will be paid off sooner, meaning fewer monthly payments will be due.

4/2012 **Paid off 60 month car loan in 60 months**
6/11/2012 500 Auto EQ (CarMax)
7/2012 **Paid off 60 month VW car loan in 32 months**
8/13/2012 584 TU myFICO
8/16/2012 577 EQ myFICO
8/18/2012 **New $500 CC from WalMart** (1st CC since 2008)
8/19/2012 **New $200 CC from Capital One** (2nd CC since 2008)
Message 7 of 9
CreditMulligan
New Member

Re: Extra payments on auto loan

Thanks for the tip. I didn't stop to think about needing to call in to make principal only payments.
Message 8 of 9
coterotie
Established Contributor

Re: Extra payments on auto loan

Actually you can set up the extra payments as an auto-pay.  You call the number set up the regular payment then tell them to apply $XXX as a principal reduction.  You can still pay extra over and above this as well.

Message 9 of 9
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