Why you should not skip a car payment when offered...

[Anonymous]

Of course we all know that banks are in business to make money, but we never really know ALL of the ways they make money off of us, no matter how smart we are.

I just had a very interesting conversation with a client that's in the auto finance dept at Wachovia. The reason I thought this was interesting was because I have read several posts across the internet on auto loans pay status as being reported as currently delinquent when in fact they had been paid and closed. I too had been going back and forth with FMC about a loan that I co-signed on for the lil sis that has been paid off since July 06, but showed currently past due 30 days.

The first reason you should not skip is obviously the extra and "special" interest rate you get charged daily for after your due date. So even though you are not getting a 30 day mark on your credit for being 15 days late, you are paying extra for it, even if they do not implement a late fee.

The most important reason why you shouldn't skip is your pay status will show as delinquent because the banks go by your maturity date. So let's say you have maturity date of July of 08, but you skipped a payment and they added it on at the end of your loan. When you pay that loan off they will show you as being 30 days behind. Why? Because you are 30 days behind your maturity date!

Also, after you have reached and pass your maturity date you are no longer paying the nice little interest that you were paying when you first signed your loan; you are paying a new default interest rate because you are now past the original terms on your contract.

Not all banks practice this, but as mentioned earlier I have seen a number of people ask why are their car loans that are paid and closed being reported as delinquent.

If anyone else have anything to add feel free. This is not something that is etched in stone, this is something that I have been told by a person that works in the auto loan dept at a bank.

Most importantly... MAKE SURE YOU READ YOUR CONTRACT AND PAY ATTENTION TO THE "NEW" TERMS AND CONDITIONS you get in the mail from your nice little auto lender.

Message Edited by jaybee on 05-28-2008 03:09 PM

[Anonymous]

Good post.  Thanks for sharing.

[Anonymous]

Jaybee I would like to add this to your post: I had 2 installment loans one was a truck the other a new harley davidson. I financed them both thru Regions Bank  @ the same time terms was 48 Mos- included in my contract .Regions offered 2 Holiday payments given on both loans for the month of December.I accepted the holiday payments and at the end of my loan there was a 49th installment not 48. I was charged interest for the holiday payments It wasn"t much because I used them in the second and third year of my loans @ that time most of the interest had been paid. However not once did they ever report a 30 day late on any of my CR"S to this day PIF in 9-06 both loans. I suppose it is up to the individual lender as to the way they choose to report to CRA. Great post Thanks Credit 08.

[Anonymous]

Credit08,

You are right, most banks will not report a 30 late payment at the time that you skip the payment (I haven't heard of anyone saying someone has).

The 30 day I was talking about is when the loan is paid and closed, then they will put in the pay status after it is closed as 30 days, not while it is open.

As I mentioned earlier not everyone is doing this, but I know FMC and HSBC has done this.

With my sis FMC loan I GW'd them and they did update it to current, but the computer generate it as being behind and sends that info to CRA's.

So far we know that Regions don't do it and FMC and HSBC does.

[Junejer]

Maybe a way around this little glitch is to have them re-write the loan, when skipping payments. When I was first in banking, I did a lot of this for our good customers. That way, the new maturity is always reflected.

[Anonymous]

That's a good idea Byrd. So what would they ask? Could they change the maturity date?

[Anonymous]

Hello Jaybee what I was saying in regards to your post about the 30 day late showing up only after the loan was PIF and closed. Is this I never had any 30 day lates  even after both my loans were PIF and closed also did not have any 30 lates during the time the loans were open and balances owed. I suppose the lenders have the right to do what they see fit in regards to matters such as these.

[marty56]

I financed my triuck through a credit union and each December I can skip a payment.  On the account the maturity date change to reflect this so that would be another way to check if they are handiling it properly.

They only thing I have seen that relates to skipping a payment problem is when I had a LOC with MBNA (BofA) and they would send me a notice that I could pay only $15 for the month but in fine print it says that the $15 must be enough to pay the finance charges which it wasnt. 

Message Edited by marty56 on 05-29-2008 06:09 PM

[Anonymous]

Marty

That's the thing a lot of people do not think about having the maturity date changed. I think this is just yet another way to keep people's scores lower. As Byrd stated they can call and ask to have it changed, if the bank doesn't do it automatically.

[deskjockey101]

what if you pay off the loan early anyway? i did a skip (they sent me a letter saying the holiday season was on us.... meaning me LOL).. i plan to pay off the truck early..