Karl
Clovis,#2Consumer Comment
Wed, March 28, 2012
A lot of finance contracts are written in adherence to the "Rule of 78s" which means that for most of the life of the loan most of the payment goes to interest. This is perfectly legal. The interest is paid before the principal. Perhaps a commenter who deals in financial affairs can explain this in detail. Bottom line is that this type of loan is fine if you intend to keep the car through the entire loan period. The problem is when you decide to trade it in before it is paid for. You realize that you still owe most of what you financed so that you are in the bucket. Avoid this type of financing if possible. Most banks and credit unions don't use this financing structure and interest and principal are paid during the life of the loan.
MovingForward
Wellington,#3Consumer Comment
Sun, December 11, 2011
If you don't have a copy of your amortization schedule from the lender, then go to bankrate dot com or any other reputable amortization calculator and put in your loan start date, the payment amount the interest rate etc and calculate the actual amortization of your loan. Once you have it in hand, compare the schedule to your actual payments.
If you are paying late, then late fees and extra interest will reduce the amount that is applied to your principal balance. On the other hand, if you pay early and add even small amounts of extra principal you will pay down your loan much more quickly.
Once you get to a point where you can refinance the loan, do so. You may owe more on it than it is worth right now, especially if you have a high interest loan. It is in your best interest to refi that loan as soon as you can. You may need to bring in a large down payment to the new lender in order to refi.
In the future, read the contract first so you know what the financing is going to cost you. Get a copy of the amortization schedule right when you finance it and you will see exactly how much goes to interest and principal when you make timely payments. If you don't like what you see, don't sign the contract.
MovingForward
Wellington,#4Consumer Comment
Sun, December 11, 2011
If you don't have a copy of your amortization schedule from the lender, then go to bankrate dot com or any other reputable amortization calculator and put in your loan start date, the payment amount the interest rate etc and calculate the actual amortization of your loan. Once you have it in hand, compare the schedule to your actual payments.
If you are paying late, then late fees and extra interest will reduce the amount that is applied to your principal balance. On the other hand, if you pay early and add even small amounts of extra principal you will pay down your loan much more quickly.
Once you get to a point where you can refinance the loan, do so. You may owe more on it than it is worth right now, especially if you have a high interest loan. It is in your best interest to refi that loan as soon as you can. You may need to bring in a large down payment to the new lender in order to refi.
In the future, read the contract first so you know what the financing is going to cost you. Get a copy of the amortization schedule right when you finance it and you will see exactly how much goes to interest and principal when you make timely payments. If you don't like what you see, don't sign the contract.
Jim
Orlando,#5Consumer Comment
Tue, December 06, 2011
This is standard procedure for loan repayment! Nothing illegal, immoral or unethical here.