paying off the principal ahead of time

[GTT]

I took a loan from Honda but the APR is high 4.9%. Total amount is 10000 with 60 months. So the monthly payment is about 180.

I want to lower the interest but keep the term as long as possible as it's good for the credit score.

My plan is to pay 8000 in the first one or two months, then I have only 2000 left for the left 58 months. So my question is, will Honda continue to bill me at 180 a month till the rest is paid off ( in about 5 months) or Honda will adjust the monthly payment according to the left principal. 

Any advise please?

[StartingOver10]

No, you get billed at the monthly rate, in your case $180 until it is paid in full and usually the last month is less than a full payment if you have paid everything on time.

If you look at the note you signed it will say $X/month for 59 months and then Y for month 60 (should say that or close to that) subject to late fees, etc.

By paying a lump sum early in the loan it saves you thousands of dollars in interest over the term of the loan.

[pokerpro]

I think it differs

I have an auto loan with chase, I paid a substantial amount and still the monthly amount is due as usual.

but my wife has one with lexus financial, and after 10K payment, they told him she does not owe another payment until 2015

[StartingOver10]

Yes, but her payment amount doesn't change. They are just pushing the due date out to try to recapture the interest by not having her make any payments until the 2015. That way the interest can build up on the loan during that time. Who would do that? The whole point of making lump sum payments is to reduce the overall interest paid out on the loan.

BTW, I have a Chase loan and when I make lump sum payments, the payment date is stretched out too. But then that defeats the entire purpose of making a lump sum payment if I don't continue to make at least the normal monthly payment.

I thought your question was "...will Honda adjust the payment amount." And the answer to that question is no. The payments are fixed amounts as indicated in your note. But naturally if you end up paying off the principal balance early, the payments stop.

[GTT]

Do I have to tell the Honda Finance that I'm trying to pay off the principal or otherwise, they might consider the overpayment as deposit on my account they stil charge interests over time by taking the monthly out from the deposit?

[pizzadude]

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@GTT wrote:

Do I have to tell the Honda Finance that I'm trying to pay off the principal or otherwise, they might consider the overpayment as deposit on my account they stil charge interests over time by taking the monthly out from the deposit?

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You need to read your loan agreement to see how they'll apply the extra money -- as others mentioned it may just push out your next payment due date.

[Hoya08]

Make sure the lump-sump payment is credited towards principal.  In this scenario, you continue to make the obligatory $180 payment each month until the loan is paid off.

Becareful if the lender says, "becaue of X lump-sump payment, you don't have to make another payment until Y date."  This means the lump-sum payment did NOT go 100% towards pricinpial; instead, it was applied to Z numbers of monthly payments (principal AND interest you would have paid).

[GTT]

Thanks for the tips. I'm waiting for the mail from Honda Finance to see how it works but I will keep an eye on that.

[Falcon50Driver]

I pay Honda Financial online and it has a check box where you can specifically make a principal payment

[GTT]

Yes, a friend of mine told me the same thing. Still waiting for the mail from Honda Finance