is there anyone on this forum who understands the lending world? i'm retarded when it comes to loans, and i just realized tonight that i may be royally f***ed on the loan i have on my car. i'll be pulling my hair out while i wait for someone to help... [:@]

 

What type of problem do you have? In detail if possible.

 

i basically feel like my bank is screwing me. i was told during signing that if a loan is created in the state of colorado, there is no penalty for being able to pay it off early. i'm all about having the longest time possible to lower the monthly payment, so that way i can pay off more of the principal and tell the bank to shove it on all the interest they want from me. but, i think my bank is trying to charge me for a set amount of interest.

my loan of $6000 was created in april and my first payment of $113.50 was due in may. my interest rate is supposed to be 8.15%. so, i paid $225. $40 went to interest, the rest went to principal. i did this again for the following month, and i paid $53 in interest, and the rest in principal. then the following month i paid $1113.00 (sold my other car), an $29 of it went to interest, and the rest to principal. this month i was a little broke, so i only paid $175. $33 of it went to interest, the rest to principal. so i got all PO'd because i thought my interest was going way down after making the huge payment in july.

upon further investigation, it almost seems like they're treating the loan like a credit card payment. they are charging me daily interest (8.15/3.65, fine, i get that). but it seems like i've got two different payments: principal and interest. my first payment was almost double the minimum, so the interest was doubled. i thought they were just supposed to take the interest off the minimum of $113, which would be around $20, and the rest is directly applied to principal. i don't understand why they are doing this.

also, my next payment isn't due until 8/06 for $77. why is this? i would figure i still have to make at least the $113 every month until it's paid off. i'm wondering if the bank isn't allowing me to put the excess toward principal? on my loan contract from the dealership, it says if i make the minimum payments on schedule, that i will end up paying $7459. i don't want to pay $1450 in interest, but it seems like the bank is trying to get that amount no matter what.

i'm wondering if i should refi through a different bank.

how's that for detailed? if you can offer any insight, i'd appreciate it. i love math, but i hate business math.

 

i think you need to put "principle" on the "for" line of the check for it to go to principle. otherwise they just count it toward your next payment. thats why youre a year ahead. i would call customer service and tell them that you want to make extra payments toward the principle, and how do you do that. they should be able to tell you what to do differently.

 

From what I understand of loans, you pay the intrest off first and then the principal, if you want to pay on principal... write 2 seperate checks, one for the minimum payment and one for principal and like sacicons said make sure you write "for principal" on the memo line of the check.

 

I worked in the banking world for three years, the last six months of which I handled few loans here and there.

Yes, the bank collects its interest first. This is so that if you default on the loan they can sell the car and recover the principal owed through that, but there's no way for them to recover their "fee", which is the interest. And besides, banks like their money

I didn't deal with the situation you're in a whole bunch, but yes, you need to make it painfully clear that you want to pay extra towards PRINCIPAL or they'll just apply it as another regular payment, and that's why you're ahead.