Americredit Financial Services balloon payment simple interest bomb Fort Worth Texas
My husband and I financed a car through Americredit back in 2002. We would have been paid off in August 2007 but we experienced financial hardships and had a total of 8 months of deferment (they charged me deferment fees when I deferred). This made our payoff date for this coming May.
When I checked my account online it said balance due 2400.00. I called to find out why my balance was 2400 dollars with only two payments left. The response I got was that because we were past due we acrued daily interest fees. I asked the representative to show me where on my contract it says that I have to pay daily interest fees. The representative said at the top of my contract where it says simple interest loan. I still don't understand how this explains daily interest fees. that is the type of loan that it is. I had no idea what a simple interest loan was when I financed the car and still do not know what it is.
When I was offered the defferments nothing was ever said about daily interest being acrued on my loan. I spoke to them today and they assured me that the balloon payment can be worked out in payments over several months if need be, but something does not sit right with me. If they demand all within a short time like some of the posters here. I will lose my car. This is more than my monthly income. Is there no advocates or anyone to advise us. If a class action lawsuit is started I am willing to join in.
Yvonne
York, Pennsylvania
U.S.A.
2 Updates & Rebuttals
Fyi
DALLAS,Texas,
U.S.A.
fyi
#3UPDATE Employee
Sat, April 19, 2008
first of all americredit did not invent the term of the meaning of SIMPLE INTEREST LOANS. Secondly you signed the contract with the at the dealership and since you did not ask the finance person about the daily interest that is clearly stated in your contract- i will assume you did not read the contract probably because you were just happy that any finance company would give you a laon- i am guessing your credit score was already below 600. And a deferment helped you by bringing down your delinquency rather that continuing to bill you for each day you were late and to use all 8 deferments is really abusing the systems. sounds like your problem is more of an affordability issue to me- sound fimiliar, words of advice- pay your bills ontime as specified in your contract and you would never have to worry about daily intereset and i wont have to call you
Nikki
Coconut Creek,Florida,
U.S.A.
Lesson in Simple Interest loans.
#3Consumer Suggestion
Wed, March 19, 2008
No where does any paperwork explain how simple interest loans work, only that your loan is a simple interest loan. Many auto loans are these days. Here's my understanding of how it works. I am not a financial advisor, or in the business, but I think I have the general gist of it.
Say your payment is $400 per month and $300 this month is supposed to go to interest and $100 towards principal. $300 = $10 per day interest (your company may use exact days such as 31 days or 28 days, but this is the general idea. Say they post this payment 30 days after your last one. You will be charged $10 per day interest, just like it's supposed to be.
Now, say you make your next payment 45 days after the last one (only 15 days late). You will be chared 45 days of interest ($450, or a few cents off because the last payment reduced your principal balance). Out of your $400 payment, none goes to principal and you are now behind $50 in interest charges.
Say your next payment is only 15 days after the last one (this one is ontime). $150 goes to interest, plus the $50 you were over last month, and $200 goes to principal.
This does not take into account any additional late fees added because you are more than a certain amount of days late.
Now, say you ask for a deferment. They put the payment on the end of the loan. However, the next payment you make is now charged for 60 days of interest ($600). You make your $400 payment and none goes towards principal and you are now $200 behind in interest. You then make your next payment 30 days later so the $300 goes to interest, plus the $200 behind in interest, leaving you still behind $100 for interest. So, that month, you had no money going to principal either, all to interest. Same with the next month. And this is only if you are ontime! At least three months of payments wasted, all going to interest and none towards principal.
If you keep decent records of payments, you can go online and find a simple interest loan spreadsheet. Enter your loan amt, interest rate, months, and enter all your payments on the date you made them. See what balance that shows. Also, try to take into account all the additional late fees added if your company does this.
Many companies also do not allow you to extend your contract ending date when you request a deferment, but it looks like your did. Hopefully they allow you additional time to pay the rest off.