Auto Loan questions

[Anthony]

8 months ago I purhcased a 07 Altima for my mom.
I bought the car with the plan to pay it off early.

I didnt get the best rate ,but I knew I would pay it off fast to reduce interest so I wasnt to concerned with it.

After down payment the loan amount was $11,460 financed over 60 months with a 7.49% APR.
The payment is $229.93 , and over the 8 months that would = $1839.44

So far I have payed $2600 ,and my plan was to pay it off over the next 3 months.
The payoff is $9605. The payoff seems a little high. Did they take all $760 extra that im ahead ,and apply towards interest?
Something just does not seem right so now im wondering if I should just skip my 3 month plan and just pay if off now.

What do you guys think? The contract says its a simple interest loan.

I got my Frontier new in 04 with a 8.9% APR and financed $8800 for 60 months, and paid that off over a 16 month period ,and only paid $600 in total interest.

Thanks for any feedback!

 

[wallyuwl]

Look at the terms of your loan, and/or call the bank. They will tell you what they did with the extra money (ie: apply toward interest or principal). Interest adds up quickest at the beginning of the loan, a lot of your required payment would have gone toward interest even if they applied the extra money you paid to principal.

 

[Hallmark]

With the info provided, any answers would only be speculation and provisional. I, like many others, could surmise several scenarios, but those replys wouldn't properly address multiple issues involved here.

You need to address the question TO THE LOAN PROVIDER.

 

[BGK]

Loan payments are mostly interest in the beginning and gradually decrease to principal toward the end. There is a way of calculating it. Search online for a loan calcuation calculator....

 

[tomcat27]

It appears that you have paid approx $95 extra each month? depending on the timing of your first payment, and the payoff request - I figure your payoff should be approx $9388

Are they possibly adding in payment/loan insurance?

simple interest is pretty much the standard on consumer loans

on average (for the first 8 months) you have paid approx $65/month in interest. (starting at $70 a month and dropping to $60)

 

[AdRock]

They probably credited it to the account as pre paid interest. When I was paying extra on my last car I always made 2 seperate payment transactions. 1 was the normal payment, the second was told to be applied to principal only.

We do the same with the house mortgage we have now. If we don't specify the second transaction to be applied as a principal only payment they treat it as an early payment and split it between interest & principal.

 

[CivicFan]

The extra amount in the payment can go to two places:

1. towards a future payment in which case the next due date may be shifted into the future. This is usually how the payments work; or

2. towards the principal which leaves the next due date the same but reduces the principal amount. This option is something that has to be requested explicitly at the time of the payment.

As far as paying off the loan early, make sure that there are no prepayment penalties.

 

[dwendt44]

Originally Posted By: AdRock
They probably credited it to the account as pre paid interest. When I was paying extra on my last car I always made 2 seperate payment transactions. 1 was the normal payment, the second was told to be applied to principal only.

We do the same with the house mortgage we have now. If we don't specify the second transaction to be applied as a principal only payment they treat it as an early payment and split it between interest & principal.



+1

 

[javacontour]

We would have to know more such as if you got some time before you had to make your first payment.

I did a simple calculation and got the first months interest at about $71.53. ($11,460 * (0.0749/12))= $71.53 The interest should go down each month. But probably only a dollar or two each month. So after 9 months you would have paid $643.77 in interest.

However, if you got 90 days before you had to make your first payment, the amount of interest due could be higher. We would have to know the origination date of the loan, as well as dates each payment was made.

My figures are estimates, and rough ones, so the actual interest due may be higher depending on how they are compounding the interest charges.

The beginning principle was 11460 and the payoff today is 9605. This means you've paid $1855 principle and $745 interest.

The figure is not out of the ball park, especially if you had 60 or 90 days before you had to make your first payment.

It may still be in the neighborhood if they are using a compounding formula that is very much to their advantage. I.E every day they add a bit more interest to the principle and then when you make your payment, the balance drops.

I.E. day 1 you owe 11,462, day 2 you owe 11464, day 3 you owe 11466 and on day 30 you owe 11535, your payment for $325 arrives and your new payoff is 11210. The next day, 11212....

Again, I'm using rough in my head numbers here, so the actual figures are probably close, but not exact.

 

[JHZR2]

Often the way they work it is apply the extra payments towards forward payments, not principal. Id download an excel amortization worksheet, put in your payments exactly, and show exactly where you are.

 

[Anthony]

Originally Posted By: javacontour
We would have to know more such as if you got some time before you had to make your first payment.

I did a simple calculation and got the first months interest at about $71.53. ($11,460 * (0.0749/12))= $71.53 The interest should go down each month. But probably only a dollar or two each month. So after 9 months you would have paid $643.77 in interest.

However, if you got 90 days before you had to make your first payment, the amount of interest due could be higher. We would have to know the origination date of the loan, as well as dates each payment was made.

My figures are estimates, and rough ones, so the actual interest due may be higher depending on how they are compounding the interest charges.

The beginning principle was 11460 and the payoff today is 9605. This means you've paid $1855 principle and $745 interest.

The figure is not out of the ball park, especially if you had 60 or 90 days before you had to make your first payment.

It may still be in the neighborhood if they are using a compounding formula that is very much to their advantage. I.E every day they add a bit more interest to the principle and then when you make your payment, the balance drops.

I.E. day 1 you owe 11,462, day 2 you owe 11464, day 3 you owe 11466 and on day 30 you owe 11535, your payment for $325 arrives and your new payoff is 11210. The next day, 11212....

Again, I'm using rough in my head numbers here, so the actual figures are probably close, but not exact.


I appreciate all the replys.
Javacountour this is exactly what is happening.
It says on the website where I check the payoff amount that $1.93 is added every day after.

This is only the 2nd vehicle I have financed so Im still learning.
It is clearly in my best interest to pay this loan off so I will do just that next week.

Ive only had credit for 7 years with my first credit of any kind being my truck. After a truck, a couple of toys ,and a few credit cards I had hoped for a better finance deal on this car!

Never late on any payments on anything and everything else is paid off.
Thanks again for all the feedback!

 

[JHZR2]

Chances are then that you couldnt afford it, meaning that either your income was too low relative to the cost of the car or that your total debt load relative to your income was too high. It is also possible that someone else has incurred debt on your identity without you knowing. Have you looked at your credit report?

I'd listen to Dave Ramsey. Credit really isnt needed, and is mostly a sham to induce you into buying more than you can afford and entrpaping you into financial slavery. A mortgage is one thing, most other consumer debt is another. Dont get caught up in the "credit score" trap. Make sound finanical decisions, be frugal, save and pay cash or make smart, calculated decisions on debt only when you can be responsible with it and use it in your favor.

 

[Anthony]

Affording it is def not the issue.
I dont keep any credit card debt ,and I will only finance something if I can pay the loan in half of the time given or less.

I monitor my credit using Equifax ,and have for about 4 years I beleive.
I will be more patient ,and not use a dealers bank next time.

 

[JHZR2]

Half the time or less isnt affording it, that's my point. Sure, you may have free money to do that, but are you saving for retirement? Other things? Id try to save the money versus borrow it. You still pay a LOT on the loan at 7.x%, whether you pay it off in half time or full time.

From what Ive seen, the dealers have some of the best rates. But if you have an issue like I cited above, nobody is going to touch you with a good rate. Many of the best require a score close to 800. Find out why yours isnt and youll have your answer. If it is, then you know the dealer was getting you.

 

[CivicFan]

Originally Posted By: JHZR2
Chances are then that you couldnt afford it, meaning that either your income was too low relative to the cost of the car or that your total debt load relative to your income was too high. It is also possible that someone else has incurred debt on your identity without you knowing. Have you looked at your credit report?

I'd listen to Dave Ramsey. Credit really isnt needed, and is mostly a sham to induce you into buying more than you can afford and entrpaping you into financial slavery. A mortgage is one thing, most other consumer debt is another. Dont get caught up in the "credit score" trap. Make sound finanical decisions, be frugal, save and pay cash or make smart, calculated decisions on debt only when you can be responsible with it and use it in your favor.


My guess is that you have a mortgage loan but no other loans?

 

[The_Jeff]

Originally Posted By: JHZR2
Chances are then that you couldnt afford it, meaning that either your income was too low relative to the cost of the car or that your total debt load relative to your income was too high. It is also possible that someone else has incurred debt on your identity without you knowing. Have you looked at your credit report?


Thirdly possible he has pretty good credit but the dealer gave him a contract for pretty poor credit.

Another option, besides paying it off (the best) is refinancing at a local credit union or something.

To OP, did you tell the dealer a monthly payment you could make? Did they bring up the idea of the 7 year loan, and "don't worry you can pay it down quickly"? They might have gotten a bigger commission on a longer term loan, for example.

 

[Anthony]

Originally Posted By: JHZR2
Half the time or less isnt affording it, that's my point. Sure, you may have free money to do that, but are you saving for retirement? Other things? Id try to save the money versus borrow it. You still pay a LOT on the loan at 7.x%, whether you pay it off in half time or full time.

From what Ive seen, the dealers have some of the best rates. But if you have an issue like I cited above, nobody is going to touch you with a good rate. Many of the best require a score close to 800. Find out why yours isnt and youll have your answer. If it is, then you know the dealer was getting you.


The main reason I posted this was to better understand why the balance was higher than I had expected at that point.
But since we are digging so deep, I have been putting into a retirement fund for the last 3 years. My credit score and this isent saying alot but it is 748 per Equifax which I pay monthly to monitor.

I could have paid cash the day I bought this car.
Id rather leave the money in the bank.

I manage my money quite well for a 27 year old actually.

 

[Anthony]

Originally Posted By: eljefino
Originally Posted By: JHZR2
Chances are then that you couldnt afford it, meaning that either your income was too low relative to the cost of the car or that your total debt load relative to your income was too high. It is also possible that someone else has incurred debt on your identity without you knowing. Have you looked at your credit report?


Thirdly possible he has pretty good credit but the dealer gave him a contract for pretty poor credit.

Another option, besides paying it off (the best) is refinancing at a local credit union or something.

To OP, did you tell the dealer a monthly payment you could make? Did they bring up the idea of the 7 year loan, and "don't worry you can pay it down quickly"? They might have gotten a bigger commission on a longer term loan, for example.


No I NEVER tell them that since that is a none issue.
I knew I would be paying it off early and the driveout price is my main concern. I knew 7.49% was a bit steep but with my first financed car I did better even though the rate was 8.9%

I was mostly focused on the driveout price but this experience has taught me to take my time next time and get the rate I know I qualify for.

This car came from a fairly small dealer who sells mostly Nissan, Toyota, and Hondas. I probably would have been better off getting one from a actual Nissan dealer as far as the financing goes.

 

[bladecutter]

Its not too late to talk to a local credit union and see if you can get a better rate for your truck.

And having credit isn't a bad thing.
A great credit history helps when the time comes, and you want to buy a house. It also helps a lot when you have a disaster in your life, and need to buy something unexpected and expensive.

Some people take pride in not having any payments every month, and then when they need to get a loan for a house, or a car, they are then shocked to learn that they don't qualify for a great rate, even though they have done everything they have been told to avoid debt.

BC.

 

[kendrickson]

Originally Posted By: JHZR2

I'd listen to Dave Ramsey. Credit really isnt needed, and is mostly a sham to induce you into buying more than you can afford and entrpaping you into financial slavery. A mortgage is one thing, most other consumer debt is another. Dont get caught up in the "credit score" trap. Make sound finanical decisions, be frugal, save and pay cash or make smart, calculated decisions on debt only when you can be responsible with it and use it in your favor.


Having learned the hard way, I can firmly recommend this advice. You will save yourself a lot of heartache and stress if you learn this lesson BEFORE you get into financial trouble. This is not necessarily directed at the original poster, but just agreeing in general with the above advice.