Nancy
Huntsville,#2Consumer 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,#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.