Paying the Principal

[HousingCounselor]

Don't be fooled into thinking it takes some super complicated calculator to refigure the balance. It's a simple excel formula. If some bank told you they couldn't afford the software, they're lying.

They have penalties because they want to earn the interest rate as long as possible. Penalties deter you from prepaying, meaning they encourage you to borrow longer.

Whoa! I didn't say that they couldn't afford it or look elsewhere for something cheaper. They just don't want to.
They do the same thing with mortgages when you're behind on your payment. If you're so many months behind they will either reject single payments from that point on if it's not enough to cure the default or they will cash them and hold them in a suspense account and not apply them to anything except maybe taxes and ins. until they get enough to bring the mortgage current.

[amylynn]

I Got The Same Story

My Husband and I bought a car about 7 months ago. It was a scary decision, but one that needed to be made. Anyways, we have been paying over the minimum every month and now we are one month ahead in our payments! Yay!

Anyways, the company says that you have to be ahead in your payments by three months in order to request to start paying on the principal. I just want to understand what that means.

Does that mean no interest will be incurred? Because it will still take time to pay down the loan, like 3 more years instead of 5. Hubby says it means that we will pay only what we owe, no interest. Can anyone explain?

I made a couple of extra payments on my loan requesting they go toward principle as well. When they did not, I called. I got two answers from two different people. The first person said that the processing plant I sent my checks to is not set up to do this. When I asked for an alternate payment method that could apply my extra payments to principle only, I was told there was none.

Then I spoke with a person who told me that after the third payment, my extra payments would AUTOMATICALLY be applied to the principle. I was so frustrated that I accepted that answer and hung up the phone. Since that time, I have made eight (8) extra payments "toward the principle," none of which have actually been copletely applied to the principle as promised.

If anyone knows how I can receive some help in this matter, please let me know. I am angry at Citibank for selling me out to such a disreputable company as Santander Consumer USA. I feel helpless.

[herdjohnson]

I have my car loan through Ally (formerly GMAC). They do their paydowns in a weird way too. Instead of applying my payment only to principal, they calculate the interest from the last payment and subtract it - then the amount that goes to principal goes against my next payment. So I've been paying triple payments for the last 6 months and now if I lost my job I wouldn't owe a car payment until next January. I was a little weary about it at first, but after analyzing it in excel it's really six of one, half a dozen of another. I'm not sure if that is what is happening on your account or not though.

[Like2Plan]

I made a couple of extra payments on my loan requesting they go toward principle as well. When they did not, I called. I got two answers from two different people. The first person said that the processing plant I sent my checks to is not set up to do this. When I asked for an alternate payment method that could apply my extra payments to principle only, I was told there was none.

Then I spoke with a person who told me that after the third payment, my extra payments would AUTOMATICALLY be applied to the principle. I was so frustrated that I accepted that answer and hung up the phone. Since that time, I have made eight (8) extra payments "toward the principle," none of which have actually been copletely applied to the principle as promised.

If anyone knows how I can receive some help in this matter, please let me know. I am angry at Citibank for selling me out to such a disreputable company as Santander Consumer USA. I feel helpless.

amylynn,
Could you look around and find a credit union that you could join where you could refinance the car and pay off the original note and then not have to deal with them anymore?
Here is a link to PenFed for example: PenFedwhich is currently advertising a 1.99% used car loan rate. (You could join PenFed even if you are not military by joining National Military Family Association or Voices for America's Troops, but you may find a local credit union with an even more attractive rate.)