Auto loan balance keeps rising...

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yh125d

yh125d

Diamond Member
Dec 23, 2006
6,886
0
76
Everytime I look at my amount owed on my car loan, its higher than last time. Last monday it was like 7114, friday it was 7138, today is 7143...


Whats going on? Wondering if theres a quick answer before I call my bank
 
C

CVSiN

Diamond Member
Jul 19, 2004
9,289
1
0
Um LOL? and you're asking us? wtf are you waiting for call the bank..
 
Safeway

Safeway

Lifer
Jun 22, 2004
12,074
9
81
Depressing to know that you have to pay $150 in interest every month. Seeing it applied to your balance at the end of every day just makes it worse.

Tip: Pay cash for your next vehicle.
 
Evadman

Evadman

Administrator Emeritus<br>Elite Member
Feb 18, 2001
30,990
5
81
yh125d said:
Everytime I look at my amount owed on my car loan, its higher than last time. Last monday it was like 7114, friday it was 7138, today is 7143...
Click to expand...

$5 in 3 days on $7138. $1.67 per day interest. A daily rate of 0.000234% In a year, if you make no payments, you will owe $7772.44, or 634.44 more. That works out to an effective rate of 8.89%. That's an expensive car loan.
 
yh125d

yh125d

Diamond Member
Dec 23, 2006
6,886
0
76
And no, its not some 84month 15&#37; loan, its 48/7.69%.


I guess I know how interest is handled now. In my payment history it shows how much is principal vs interest, but it seems weird for the principal balance to vary like that

ex:

March 1 I have a balance of, say, $7500

March 2 I make a $250 payment, of which $150 is principal and $100 is interest

March 3 I have a balance of $7350

March 4 I have a balance of $7355...

Just seems weird.
 
Skitzer

Skitzer

Diamond Member
Mar 20, 2000
4,414
3
81
Unless you got your car loan from this guy, this should not be happening. The loan cannot go up unless you are missing payments or your interest rate is > 100&#37;

tony_soprano.jpg
 
S

ShawnD1

Lifer
May 24, 2003
15,987
2
81
BoomerD said:
Interest compounding daily...
Click to expand...
math tip of the day: if they compounded it every second, the effective interest rate would be 172&#37; yearly ;)

(1 + 1/n)^n where n is infinite compounding periods = 2.71828182845904



Unless you got your car loan from this guy, this should not be happening. The loan cannot go up unless you are missing payments or your interest rate is > 100%
Click to expand...
It probably says something like 3% interest rate then in brackets (compounded every trillionth of a second)


And no, its not some 84month 15% loan, its 48/7.69%.
Click to expand...
Holy shit that's high. You sure this isn't a mafia loan? Most car loans are more like 2.9%


Tip: Pay cash for your next vehicle.
Click to expand...
Anyone who doesn't have 20k in cash in addition to their 6 months of emergency money = retarded. Everyone knows this.
 
Last edited:
O

OCGuy

Lifer
Jul 12, 2000
27,224
37
91
Are you sure that is your principal balance rising, or is it showing your payoff? (Difference)
 
yh125d

yh125d

Diamond Member
Dec 23, 2006
6,886
0
76
Skitzer said:
Unless you got your car loan from this guy, this should not be happening. The loan cannot go up unless you are missing payments or your interest rate is > 100%
Click to expand...

Sorry, I wasn't clear


The balance is definitely going down overall, but between payments is slowly rises a bit
 
yh125d

yh125d

Diamond Member
Dec 23, 2006
6,886
0
76
OCGuy said:
Are you sure that is your principal balance rising, or is it showing your payoff? (Difference)
Click to expand...

Ah yes, i see it now. $7143.21 is my *payoff for today only. In my transactions history I see the principal balance is $7081.84



Another curiosity, why does the portion of my payment that goes to interest vary so much every month? I'd get if it was a little every month, especially if it went down slightly every month (cause loans put more of the interest up front then pay more to principal as the term goes on right?), but it isn't. It can vary from 53, to 75, to 23, to 44, to 48, yadda yadda yadda.
 
S

ShawnD1

Lifer
May 24, 2003
15,987
2
81
OCGuy said:
Are you sure that is your principal balance rising, or is it showing your payoff? (Difference)
Click to expand...
It's probably showing the total balance, not the principal.


It's because of the way loans work. By law (in some countries), money goes to the principal before it goes to the interest. The interest can be significantly higher than the monthly payments but the debt still gets paid off eventually.
Say you bought something for $10,000 and it has 20% interest and your yearly payment is $1000 (yearly makes it easier to calculate this).
start with $10,000 loan
first interest of 20% on $10,000 would be $2,000
balance is then $12,000
You pay $1,000 toward it.
Balance is now $9,000 principal + $2,000 interest = $11,000 (balance went up)
next interest is 20% of 9,000 = $1800 interest
balance is now $9,000 principal + $3,800 interest = $12,800 (balance went up again)
you pay $1,000 toward it
debt is now $8,000 principal + $3,800 interest = $11,800

So you can see how even though you are making payments, the balance still goes up. You only pay interest on the principal, and your payments go to the principal. The interest accumulating is shrinking as you pay it off. After you pay off the principal, it no longer accumulates interest but you still need to pay back the interest at the negotiated rate.
 
O

OCGuy

Lifer
Jul 12, 2000
27,224
37
91
Its called paying interest in arrears. Your first payment you made on your car loan (remember that it felt like forever before your first one was due?) paid the interest from the previous month. So every day you own the car, you owe them a little bit more interest for that month.

This is how mortgages work, which is why your "payoff balance" is never what your balance owed says on your statement.
 
T

the DRIZZLE

Platinum Member
Sep 6, 2007
2,956
1
81
ShawnD1 said:
It's probably showing the total balance, not the principal.


It's because of the way loans work. By law (in some countries), money goes to the principal before it goes to the interest. The interest can be significantly higher than the monthly payments but the debt still gets paid off eventually.
Say you bought something for $10,000 and it has 20% interest and your yearly payment is $1000 (yearly makes it easier to calculate this).
start with $10,000 loan
first interest of 20% on $10,000 would be $2,000
balance is then $12,000
You pay $1,000 toward it.
Balance is now $9,000 principal + $2,000 interest = $11,000 (balance went up)
next interest is 20% of 9,000 = $1800 interest
balance is now $9,000 principal + $3,800 interest = $12,800 (balance went up again)
you pay $1,000 toward it
debt is now $8,000 principal + $3,800 interest = $11,800

So you can see how even though you are making payments, the balance still goes up. You only pay interest on the principal, and your payments go to the principal. The interest accumulating is shrinking as you pay it off. After you pay off the principal, it no longer accumulates interest but you still need to pay back the interest at the negotiated rate.
Click to expand...

This might be the most wrong thing I ever seen posted here.
 
yh125d

yh125d

Diamond Member
Dec 23, 2006
6,886
0
76
OCGuy said:
Tip: Financing new vehicles right now can be just as cheap as paying with cash if you are Tier 1/2 credit
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Hey you know a lot about credit right? (underwriter or something?)

If one has perfect credit (no late payments, not carrying big balances on CCs, not overstretched on debt), that actually uses it (car loans/etc), how many years of that good history would you think it takes to be really *set*, as in like 775+ score, easily able to get below prime rates on loans that are properly within their salary?
 
Meghan54

Meghan54

Lifer
Oct 18, 2009
11,684
5,225
136
Like OCGuy said, you're watching your payoff. And with that, you'll watch your payoff amount increase daily as interest is added each day the loan is active.
 
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