Community Chat

[bonnielu]

Bought car. Financed it through car dealership.  Attempting to pay up quickly (hopefully). Seems payment is divided by principle and interest.  When I pay,  the payment does not go to principle entirely.  Something looked really strange in the arrangement so I called thinking ALL WAS WELL.  Turns out that I can have a choice (one I was never told up front) to designate the entire payment go directly to principle.  IN any case I plan to pay the total within a year (if possible)  I have been saving furiously.  

Those of you who have financed a car.  Have do you have any advice.  Should I just  pay principle (have to call on the phone after the payment reaches them) or  should I leave it all alone and let it run its course.  Very confusing.  I called three representatives and they are not all that helpful.  

[patbz]

In general the faster you pay off principle the less interest you will owe (therefore the total cost would be less).

[pigletsmom]

Yes you start paying interest right away. Any time I made an extra payment I would make sure to designate it as a principal payment.

Back in the day when I worked in a bank and people actually came in to make payments we would have to mark it as principal. If you do it online or electronically you probably do need to call in to make sure that happens. I would do it to make sure the principal is being reduced and that any extra money isn't going to interest.

[game-on]

Read your contract; go talk to your financier.  I have seen contracts where a person is penalized if they try to pay it off early.  Hopefully you didnt get a contract like that.

[chrystaltree]

You should have the extra payment applied to the principal because that reduces your interest.  But be careful because sometimes there is penalty for paying early.  I imagine you would have to call to make such a payment and then hope the transaction went through properly.  Personally, I'd just leave it alone and make my payments.  

[Nightowlz]

The loan on my car was for 7 yrs. I paid it in about 4 yrs. They took out a half payment each paycheck including months you get paid 3 times. When I wanted to pay extra I did it online the day after the 2nd half of payment was deducted so it went to principle except a small amount since interest is accrued daily. I could see the majority went to principle right after the transaction. I asked the credit union what was the best way for me to do this online & that's what they told me to do.

[ciao_bella]

As many have already stated, pay down on principle as soon as possible.  

Just as a side note; I generally look or wait for the car manufacturer to promote a 0% interest rate.  

[CrazyDaisy]

In most cases you will need to make your monthly payment first (principal and interest).  Depending on the type of loan anything additional can be directed to principal or toward your next months payment.  I have a loan that after I became 3 payments ahead, then I can direct all the money entirely to principal.  Suggest you call your lender and have them go over your terms with you till you understand exactly the type of loan you have.

[bonnielu]

@pigletsmom  Main question.  If I say it is going to principle as I want to do.  At the end... everything paid... do I pay less over all?  I have never been aware of my choices.  Seems all kinds of dishonest...  This was a BIG loan.  If it does not matter I will leave it alone.  

It is a Toyota so I cannot walk in and pay.  And I cannot use a credit card.  Toyota Credit.  

I am usually pretty financially atune but this time I was dazzled by the car of my dreams.  It is very smart  LOL.  Me not so.  

[CrazyDaisy]

You pay interest on the money you owe, yes they want that money first.  So payments will cover your interest first then the rest is applied to principal.  Because you were given a payment schedule that interest/principal split will not change as long as you have a loan outstanding.  Should you make additional payments and want that applied to the principal of the loan, you will pay less interest and an adjustment will be made when the loan is paid off.  There are many different types of loans which have stipulations as to early pay off or additional payments directly to principal, you need to know what your terms are.