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Bank loan payment question

S

screw3d

Diamond Member
I have a $7k auto loan from state farm bank with a scheduled monthly payment of about $320 over 2 years. I plan to pay it all off within 6 months.

Since there's no prepayment penalty and I'm paying it off real quick, I'll be paying less than $320 x 24 at the end right?


<-- noob

 
Correct you'll pay principal owed ($7000) + interest accured.

The sooner you pay it off, the less interest you pay and the more you save 🙂
 
Originally posted by: RossMAN
Correct you'll pay principal owed ($7000) + interest accured.

The sooner you pay it off, the less interest you pay and the more you save 🙂
Click to expand...

Perfect. Thanks! 🙂
 
Usually you have to tell them to apply extra money to the principal, but if you're going to be paying that much then there won't be a need to do that I'm sure.
 
Congrats on having the initiative to pay off a loan early rather than blowing the money on plasma TVs and Ipods. More people need to do this.
 
Originally posted by: FilmCamera
Usually you have to tell them to apply extra money to the principal, but if you're going to be paying that much then there won't be a need to do that I'm sure.
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Any extra money applied always goes to the principal. Where else could it go to?
 
Originally posted by: chuckywang
Originally posted by: FilmCamera
Usually you have to tell them to apply extra money to the principal, but if you're going to be paying that much then there won't be a need to do that I'm sure.
Click to expand...

Any extra money applied always goes to the principal. Where else could it go to?
Click to expand...

 
Originally posted by: chuckywang
Originally posted by: FilmCamera
Usually you have to tell them to apply extra money to the principal, but if you're going to be paying that much then there won't be a need to do that I'm sure.
Click to expand...

Any extra money applied always goes to the principal. Where else could it go to?
Click to expand...

Oh, you'd be surprised. There are some types of loans which do not have a prepayment penalty as such, but you don't benefit as much as you'd think by paying off early. Of course, this is very bad for the consumer, and it's not very common these days, but those loans do exist. Most likely to be used by car dealers with consumers with not-so-good credit.

Good explanation of the "Rule of 78s"
 
Originally posted by: chuckywang
Originally posted by: FilmCamera
Usually you have to tell them to apply extra money to the principal, but if you're going to be paying that much then there won't be a need to do that I'm sure.
Click to expand...

Any extra money applied always goes to the principal. Where else could it go to?
Click to expand...

I have seen loans where the extra payments are applied to payments in future months.
 
Took me longer than 6 months, but I'm just about to make my final payment! 🙂

$500 for the first payment, $1000/month for the rest, and $888.91 for the final payment. Total interest is $388.91 -- saved $344.61.

Does that sound right?
 
Originally posted by: screw3d
Took me longer than 6 months, but I'm just about to make my final payment! 🙂

$500 for the first payment, $1000/month for the rest, and $888.91 for the final payment. Total interest is $388.91 -- saved $344.61.

Does that sound right?
Click to expand...

Even if the math isn't right... you still win. That's a year+ of interest you're not paying now. Not to mention that the car payment you would have been paying for the next year+ is now going in you pocket.

WIN... FATALITY!
 
Originally posted by: FilmCamera
Usually you have to tell them to apply extra money to the principal, but if you're going to be paying that much then there won't be a need to do that I'm sure.
Click to expand...

This is very true! I spent 1 year paying more than my monthly minimum payments thinking that I could pay off the car sooner. I only realized that the extra payments were going towards the interest based on the initial principal value. I now tell my bank to specifically put the extra money towards principal.

 
Originally posted by: screw3d
Great, just spilled latte all over my payment slip and check :frown:
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LOL, you must have gotten excited over your interest savings.
 
I just bought a 3 seater recyliner and 2-1 seater rocker recyliners for my home theatre area ...its was $2050, I talked them down $300 but it has no tax, free delivery and no payments for 1 year. If you dont pay them off within a year and wait the interest is 28%...they sure know how to gouge and they hope that people dont pay...I made my 1st payment today and it will be paid for within a year.
 
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