Post-BK auto loan co will not apply extra payments to total amount

[Anonymous]

It's been since 06/19 that my Ch. 7 BK was DC. Since then, I have been very careful with my income. I hadn't applied for any credit up until last week (denied). My budget has been comfortable since then so I called my auto loan company to start bi-monthly auto payments of $500 each (on 1st and 15th of every month). I was highly encouraged by the rep I spoke with to do that and she even congratulated me on making such a responsible decision of paying down my loan faster to save interest.

To my surprise, I logged into my account recently and confirmed that the auto pay service was working to distribute the money accurately. Further, I noticed that my next auto payment is not due until June! Naturally, I call again, confused and frustrated, and asked the rep to explain the situation. What he told me was something I never thought a creditor could do.

He confirmed the minimum payment due each month is just over $460 at 14% interest. He also said that since I'd been making monthly payments of $500 since the start of the loan in 04/19, that money was applied to the principal, not the interest. And this is what really got me...

When I inquired about the bill not being due until 06/20, he informed me that any extra payments on an auto loan are turned over to the next month. For example, I made two payments of $500 each on the 1st and 15th of this month. Instead of putting the extra money towards paying down the loan faster, they simply put it towards the next month's payment due. So, it turns out I'm not making any headway on this loan at all! They won't allow me.

The APR is now locked at 14% for the remainder of the loan. I was on a rate reduction plan that started at 15.99% in 04/19. I cannot pay down the interest any faster and I'm stuck at a high rate until I can attempt to refinance with another creditor after two years from the Ch. 7 BK DC date of 06/19. It might be possible to refi after 06/21. 

Is this legal? Is there a way around it? Or am I just stuck?

[donkort]

That was done with my lease, too.   I made a $2,500 payment in advance.  That covered about 8 months of payments.

I don't think this is illegal.

[Anonymous]

I went to Carmax 1 month after getting dismissed from Chpt 13.  Interest rate they knocked me over the head with.......28% no lie!   I needed the car as my old car was on it's last leg plus I said to myself this is how I am to be punished for having horrible credit.  Took the loan, saleslady said I could just refi the loan after about 7-8 months.  Of course I didn't believe her......she's a carsales person I figured they all lie!  lol   About 8 months later got an flyer in the mail from OpenLoans or Road loans can't remember which on talking about a refi of my car.   I was like what the hell what harm could it be to try it all they can say is no.   Tried it and 1 day later was approved for the refi because I had been ontime with all my car payments, no lates on anything like my mortgage and I didn't have any credit cards at the time.   They dropped my interest rate down to like 7% which cut my car payment almost in half.   So with a BK you can refi as long as you don't pick up any collections, make ontime payments......happened to me.

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@Anonymous wrote:

It's been since 06/09 that my Ch. 7 BK was DC. Since then, I have been very careful with my income. I hadn't applied for any credit up until last week (denied). My budget has been comfortable since then so I called my auto loan company to start bi-monthly auto payments of $500 each (on 1st and 15th of every month). I was highly encouraged by the rep I spoke with to do that and she even congratulated me on making such a responsible decision of paying down my loan faster to save interest.

To my surprise, I logged into my account recently and confirmed that the auto pay service was working to distribute the money accurately. Further, I noticed that my next auto payment is not due until June! Naturally, I call again, confused and frustrated, and asked the rep to explain the situation. What he told me was something I never thought a creditor could do.

He confirmed the minimum payment due each month is just over $460 at 14% interest. He also said that since I'd been making monthly payments of $500 since the start of the loan in 04/19, that money was applied to the principal, not the interest. And this is what really got me...

When I inquired about the bill not being due until 06/20, he informed me that any extra payments on an auto loan are turned over to the next month. For example, I made two payments of $500 each on the 1st and 15th of this month. Instead of putting the extra money towards paying down the loan faster, they simply put it towards the next month's payment due. So, it turns out I'm not making any headway on this loan at all! They won't allow me.

The APR is now locked at 14% for the remainder of the loan. I was on a rate reduction plan that started at 15.99% in 04/19. I cannot pay down the interest any faster and I'm stuck at a high rate until I can attempt to refinance with another creditor after two years from the Ch. 7 BK DC date of 06/19. It might be possible to refi after 06/21. 

Is this legal? Is there a way around it? Or am I just stuck?

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[Anonymous]

Wow! I've been told by a few folks that I have to wait TWO YEARS after my BK DC date, which was in 06/19. The current FICO scores that I can see on all three reports range from 655-670. If I don't refinance this car soon, I will be so underwater on it that I might as well let myself drown! I have paid every payment on-time and more than the minimum amount since the loan started in 04/16. So, if your experience is true for everyone in our situation, I ought to be eligible to refi, correct?

[Anonymous]

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@Anonymous wrote:

 ... Is this legal? Is there a way around it? Or am I just stuck?

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Yes. Find another lender. Credit unions are an excellent place to look.

[Anonymous]

I spoke with a loan officer at my credit union and another at USAA not too long ago about this predicament. Both told me chances of being approved this soon after a Ch. 7 BK are pretty slim and I should wait awhile. They also encouraged me to continue working on my FICO score so that when two years have passed since 06/19, I'll be in good shape to get the lowest APR % as possible. 

That being said, my vehicle is currently worth less that $12,000. My current payoff amount on the loan is almost $19,000. I'm already in a bad situation and it's only going to get worse as interest accrues at $7.30/day (per current loan co rep). 

So, given that RBFCU and USAA won't approve me, what are my options? How would I 'shop' for another lender?

[Anonymous]

I forgot to add that I was also told I don't really stand a chance of getting approved to refi since my vehicle is worth so much less than the amount of the loan. I don't know what to do at this point. I cannot change the terms of my current loan. It's as good as it's going to get. If I can't refi because I'm upside down by several thousand dollars, I will never be able to get out from under this loan. If you have some kind of miraculous fix for this, I'd love to hear it!

[Anonymous]

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@Anonymous wrote:

... How would I 'shop' for another lender?

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Sorry. I didn't realize you were so far upside down -- 7K is a lot on a car only worth 12k. 

If I were in your shoes I'd bank that extra $500 per month you were talking about. More if I could find it. Eventually you will be able to get out from this loan with the help of that banked $$. Maybe it's a straight refi on this loan (credit unions sometimes loan greater than 100% on car loans -- I don't know if that would apply in your case). Maybe it's by rolling your deficit into a new car loan. Maybe it's just paying this one off. 

As to shopping for a new lender: I'd check out Approval thread in this forum & find profiles that most macth my own (plenty of post-bankruptcies in there). I'd probably find a FCU or two, even if not a perfect match today (ie, maybe they need 2 years post-b), and start a relationship with them. Maybe deposit that extra $500? or some part of it? Whatever. I'd get my name in the system. 

Best wishes.