Auto Loan Balance

[Anonymous]

So recently took out a high interest auto loan due to a bankruptcy. The loan company reported the initial loan amount on my credit report and a month later they are reporting a higher amount. After asking why the amount is higher they said it is due to interest on the loan, so my question is what balance are they supposed to be reporting? The principal balance or the balance with daily interest accruing?  

[Kforce]

They report the real loan balance.

If you are not making payments or payments that arn't covering the interest the balance will be going up every month

[Anonymous]

I'm making the required payment, they do not apply any extra payments to the principal they just use it to cover the next months payment which is crap. I'm just saving the extra I would be paying towards this account and going to use it as a down payment since it's the only way to pay directly on the principal . 

[Mv350]

Depending on the lender, you should be able to make separate principle only payments. My loan gives me options to pay extra, which will take off the next month's payment due, or principle only payments. Which will not go towards the next month's payment at all. Try and give them a call to ask if you can make a principle only payment over the phone. 

[Anonymous]

I tried. They won't take any off the principal, it only goes toward the next payment.

hopefully I can refinance after a year or trade it in and use a down payment on a better loan. 

[DaveInAZ]

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@Anonymous wrote:

I tried. They won't take any off the principal, it only goes toward the next payment.

hopefully I can refinance after a year or trade it in and use a down payment on a better loan. 

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I'm having a hard time wrapping my head around this as I worked in accounting. If it's legal in you state I suppose they can write the terms of the loan so that any amount paid over the required monthly payment reduces the amount due on your next payment, but the over payment amount still has to applied somewhere. In accounting it's a debit somewhere, and the only logical - and legal - place would be against the principle. A basic principle in accounting and loans is that you can't charge interest until it's earned, you can't charge tomorrow's interest until tomorrow, so they can't apply your overpayment against next month's interest. If you can post a pic of your statement that would be helpful, be sure to block out your personal info.

As for your first post, the only way they could report to the credit bureaus an amount larger than your original loan amount is if they generated that statement before you made your first payment. If you made the required monthly payment, and especially if you paid more than the required monthly payment, before they generated that statement and reported it to the CRAs, the loan amount has to be less than the original loan amount. And by law any info reported to the CRAs has to be accurate.

[K-in-Boston]

If you just opened the loan, it sounds like they reported the loan amount when the account was opened and then the statement balance when the first statement was generated which would have included accrued interest.  That should be the only statement where the balance is greater than the original amount as long as there are no additional fees, a missed payment, or if say you bought your car in April but the first payment was not due until June.

Your payment is made up of a principal amount (which starts small and gets larger as the loan balance gets smaller) and accrued interest (which starts large and gets smaller as the balance gets smaller), not future interest.  Any additional payment that you specifically request to be made to the principal should be.  Pushing your next payment date out should not necessarily mean that a principal payment was not made, but if you were doubling your payment you just need to make sure you still pay the following month when $0 is due, otherwise you essentially just made a payment early then skipped a payment.