I think you misunderstand the way a simple interest auto loan works. Your APR is broken down into a daily rate ( called a dollar day rate or per diem ). Interest is assessed on the outstanding principal daily. When you make a payment the amount you pay first clears accurued interest and fees, then the rest is applied to principal and your daily rate is lowered.
Example: $25000 loan for 72 months @ 5%. The daily rate is 0.00013699 of the outstanding balance ($3.424)
You make your payment of $402.62 30 days after the loan is funded. $102.72 is applied to accured interest ($3.424 x 30 days) and $299.90 is applied to principal. This lowers your daily rate to $3.833
Lets say you pay $602.62 in the same peramaters above. $102.72 is applied to interest and $499.90 is applied to principal. This lowers your daily rate to $3.356.
No monies are applied to unearned interest or future interest on a simple interest loan. There is no reason to designate funds to apply as additional principal as any additional funds you send in over your interest and fee balance is automatically applied to the principal balance.
I understand all of that. So answer this for me then. If I make my regular montly payment this morning, interest/principle gets split up accordingly. This afternoon if I make an additional $300 payment, shouldn't that $300 go directly to principle? No days have elapsed so no interest is due. That said, shouldn't my principle balance drop by an additional $300?
What I'm saying is that it ISN'T. If all interest has been satisfied up until that moment in time I don't understand why 100% of what I'm paying isn't going to principle.
I will agree that WF is a bit screwy.
If you do have a loan with them set up the auto pay feature. This will ensure no missed or late payments, something that people who pay via US Mail have had a problem with in other forums.
I had my payment rounded up to an even $500 (from $485.16). Each month the statement would show that I owed less of a payment each month, basically giving me credit against the over-pay on my amount due. The fact that you HAVE to notify them to in order to have the additional payment be credited to principal creates uncertainty as to how they are actually applying your payment.
I never figured out the daily rate or per diem rate that was paid as I made extra payments. If someone does have an account it would be an easy test. Make an extra $25 payment and see if the daily rate for interest was calculated for the normal payment or the normal payment +$25
Even CS isn't consistent with their story / response. I've had the loan for a little over a year now, so say I've called them 12 times (once each month) it's probably been 6 and 6 or 50/50 that I've had someone say "Any amount extra paid automatically goes to principle" and the other 50% they say "no problem, we can adjust your payment and redirect it the way you'd like with the extra going to principle." Usually if I tell the people that give the first response what I've heard in the second response they quickly change their tune and also offer to "redirect" my payment. It's all just a very sketchy operation and one a customer these days shouldn't have to go through.
I've got my next monthly payment coming up next week. I'm going to pay my monthly payment, then pay an additional $300 and I'll post my starting principle and ending principle balance a couple of days later when the payment posts to my account for those that are reading this thread to see. I'm wondering if anything will change this month since I've had 3 phone conversations (arguments) with the EO people that have called me from WFDS this month.
Check your payment history tab. Mine looked like this.
|Posting Date||Effective Date||Description||Amount||Principal Balance||Next Due Date|
|3/7/2016||3/7/2016||WEB DIRECT DEBIT PAYOFF||46.94||0.00|
|2/6/2016||2/6/2016||WEB DIRECTDEBIT PAYMENT||455.00||18094.13||3/8/2016|
|12/30/2015||12/30/2015||WEB DIRECTDEBIT PAYMENT||454.54||18190.43||2/8/2016|
|12/4/2015||12/4/2015||WEB DIRECTDEBIT PAYMENT||442.00||18396.12||1/8/2016|
|11/6/2015||11/6/2015||WEB DIRECTDEBIT PAYMENT||441.52||18567.63||12/8/2015|
|10/8/2015||10/8/2015||WEB DIRECTDEBIT PAYMENT||444.44||18726.61||11/8/2015|
My payment tab is sort of irrelevant, because it reflects the adjustments made monthly after me calling and having them "redirect" my payment. That was one thing I argued with on the phone with multiple people from the EO... all were like "everything looks fine on your statement" ... and I'm like of course it does NOW as it's been adjusted already.
That's a very good question as to why they'd have it different for small loans verses auto loans. I know what you mean about an "additional principle" box as I've seen that on past auto loan payment pages and my current mortgage payment page... but I can assure you it doesn't exist with WFDS. You can either select the payment amount (your normal monthly payment) or "other amount" and type in what you want... and one would ASSUME it goes to principle but it doesn't. For those of you that are saying it does, you and I are seeing very different things. If I owe $10,000 on the loan (after making my monthly payment) if I pay an ADDITIONAL $300 my principle balance should drop to $9700. If it drops to $9910, clearly $90 went to principle and the rest to interest or better yet vanished into thin air. Yes paying extra will lower your required payment for the following month, but I always ignore that and continue to pay my full amount PLUS an additional $300 per month and the principle balance never drops by $300-$400 total unless I call and jump through hoops and have them "redirect the payment the way I want it."
I've experienced the same thing with crappy Santander. I send a letter with a check that states "Please apply to the principal" and they still end up putting it towards interest first. I have to call each month. They have an excuse saying the computer is doing it but like I explained to them... the computer didn't open the mail and read the letter. It's like pulling teeth monthly. The Executive team said it's nothing they can do. I have to call each moth and have them reapply the payments.
Sorry to hear that - I definitely feel your pain and frustration.
I certain they do this intentionally. It's all results in them making more money which I get, it's a business, but good people should be rewarded for doing the right thing and exceeding expectations with respect to paying down a loan balance. Conversely, those that can't pay it down on time, have late payements etc. incur fees and such so THAT should be how they're making their extra money from THAT type of customer... not the "good guys."
I think that they prey on 90% of people simply not realizing that any of this is happening. People submit a payment for a few hundred extra bucks and don't take the time to do some quick math or see how the payment was applied. 9 times out of 10 I think they simply benefit/profit on customer ignorance.
Then the 10% that actually do speak up get to jump through hoops to try and get what they want. Manipulative conversations. Flat out lies. Probably at least half of that 10% after speaking to CS actually believe what they are told, that the payment is being applied the right way, you have no reason to call, etc. There's probably only a very small percentage of people like you and I that are actually successful in identifying their BS, calling them out on it, and getting it adjusted accordingly. Pretty sad when you think about the other 95%+ that are getting severely taken advantage of.
I really loathe Wells Fargo Dealer Services.
So today I go to make another payment, and it says that my payment isn't due until June 26th not May 26th? Why? Because I called and placed an additional payment last month to go toward principle. But, WFDS then applies that payment toward the following month and more or less tells you "your good for a month now" as to get you back on track with your original loan terms and still get maximum interest out of you. Sneaky, but something most people will quickly realize and still pay their normal payment regardless of the system telling them they have no payment due that month.
What REALLY annoys me though is this: I went to go place an online payment yesterday, and it says that the "maximum" that I'm allowed to pay is $554; it won't allow me to pay more than that. As a reminder my monthly payment is $250. I called up CS and asked them what gives, and they said the maximum you're allowed to pay via the online system is 2x your monthly payment plus whatever is due for your next billing period. She said due next is $54, so $250x2 + $54 = $554. I get the simple math, but what I don't get is why there's a restriction. She said that's how the online system works. I said ok, can you process my payment over the phone and she said "no, through the automated phone system or a CS rep you can't pay more than that amount." Unreal. I told her I want to pay $900 this month toward the loan. She said the only way to do that is to get a certified check and mail it in. AGAIN, as I expressed earlier in this thread, this company makes you jump through hoops any time you want to "do the right thing" which is ridiculous. I swear they do everything in their power to make it impossible to pay your loan down faster. Anyway, my certified check will be going out today... next question is whether or not they apply it to the principle balance of the loan or if they take half of it and try to apply it toward future interest. We shall see.