Household Auto Finance ripoff 23% loans, no early payoff credit for high intrest paid on loan, then to find out its a simpile intrest loan. ripoff thieves! San Diego California
I purchased a 2000 Dodge Dakota Sport in sept 2000 payments of $ 472.12 per month at 23%, because of bad credit. I never relized it was a simpile intrest loan.yesterday 3-24-03 I called for a payoff. to find out that is what kind of loan I had . I believe I have made 27 payments of $ 472.13 with totals $ 12,747.51. I purchased the vehical I believe for a little over $ 19000.00.
The payoff I recieved yesterday by phone was
$ 13,303.78. When I pay off this loan before 4-03-03 I will have paid Household Auto $26051.29 for my truck. If I pay payments to the end of I believe 60 months I will pay $ 28327.80.
I fill that I sould get some intrest credit back for paying it off early. Alot of people like me have to pay the high intrest,# 1 i'm not highly educated like alot of people to understand what simple intrest means. It is not explained buy the car dealers , all they tell you is what your credit is and thats why your intrest is high. sure you can read all the papers that they put in front of you. But how many of us understand what we are reading. Alot of us want a brand new vehical to be able to go to work, or what ever we want, just to have reliable transportation.
Cathy
Lake Placid, Florida
U.S.A.
2 Updates & Rebuttals
Nancy
Huntsville,Alabama,
U.S.A.
Pay-off balance info
#3Consumer Suggestion
Fri, March 28, 2003
If you borrowed $19,000 for the truck at 23% interest, it would not pay off in 60 months with a $472.13 payment. The payment under these terms would need to be $536.00.
Did you made a down payment or have a trade-in? A loan of $16,748.21 at 23%, would pay off in 60 months at the payment you quoted.
After the 27th payment, if interest is "simple", compounded monthly, regularly amortized would have a principal balance of roughly $11,500.
If interest is calculated in advance, compounded daily, and amortized under rule of 78s, the pay off amount would be roughly $12,900 after the 27th payment (this is only for the day the 27th payment was received). The effect of compound interest added and the number of days since your last payment, will make it higher.
Rule of 78s loads the interest in the first of the loan, ensures the maximum interest is charged, and is effectively a pre-payment penalty to offset income lost by the lender because interest is not received over the life of the loan.
If Rule of 78s does not apply to your situation, you may not be aware of charges for late payments, insurance, or fees for accounting.
John
Memphis,Tennessee,
U.S.A.
You've Been 'Ruled By 78s'
#3Consumer Suggestion
Tue, March 25, 2003
What actually has happened is that your loan interest was calculated based on the 'Rule Of 78s' instead of simple interest. What this means is that you pay all of your interest first, usually over the first year, then you start applying the payments to principal.
This is a common method used by all predatory lenders. It's perfectly legal in all states and although you pay the same amount in the end as a simple interest loan you get the shaft if you want to payoff the loan early. This is what you're just finding out. That's why predatory lenders love doing refinancing, especially after the first year. They've already made their gouge, er, ah profit.
Try to get memberhip in a credit union and work on clearing up your credit. Credit union loans are always simple interest nad the rates are extremely competetive.