postpone due date vs. paying toward principal

[ElFenix]

my student loan statement says the following:

All payments exceeding the scheduled payment amount are applied to the balance(s) of your loan(s). When payments larger than the amount due are received, the due date will be advanced one month for each full monthly payment amount received.

i'd have to call them and tell them that any extra payment each month go toward principal only into order for that to happen. i'm guessing that because the default rule is postponing the due date, i end up paying more over the life of the loan than otherwise (and obviously they're in it to make money). but i'm not certain about that.

anyone know for sure?

 

[IronWing]

You'll have to ask them exactly what you need to do to apply payments toward principal. When I pre-paid my student loans I had to write "Apply to Principal" on the coupon and the check. Your lender may have thought of something more sinister.

 

[ElFenix]

You'll have to ask them exactly what you need to do to apply payments toward principal. When I pre-paid my student loans I had to write "Apply to Principal" on the coupon and the check. Your lender may have thought of something more sinister.

i think there's an online setting i can checkbox. but i'm wondering how the math differs.

 

[BornStar]

I pay my student loans to Sallie Mae on their website through ACH and the default is to apply it to principle but they give the option to delay payments as well.

 

[IronWing]

i think there's an online setting i can checkbox. but i'm wondering how the math differs.

If you pre-pay principal, it shortens up your loan pay off period and saves you the interest on the amount prepaid for the life of the loan. If you select the option to delay the next due date, you save a minuscule bit of interest but basically just piss away the extra payment.

If you have Excel go to online help and type "loan amortization schedule". Pick the template called "Loan Amortization Schedule" (not mortgage amortization schedule). It will allow you to enter your loan details and arbitrary extra payments and shows what happens to the total payoff.

 

[Matthiasa]

Either way its only a good idea if you can't earn money with your extra cash at a rate greater then whatever your loan interest rate is.

 

[ElFenix]

If you pre-pay principal, it shortens up your loan pay off period and saves you the interest on the amount prepaid for the life of the loan. If you select the option to delay the next due date, you save a minuscule bit of interest but basically just piss away the extra payment.

If you have Excel go to online help and type "loan amortization schedule". Pick the template called "Loan Amortization Schedule" (not mortgage amortization schedule). It will allow you to enter your loan details and arbitrary extra payments and shows what happens to the total payoff.

but if i never actually delay the next due date, and rather continue paying each month whatever the usual payment is, shouldn't it end up the same?

 

[IronWing]

but if i never actually delay the next due date, and rather continue paying each month whatever the usual payment is, shouldn't it end up the same?

It depends upon what the lender does with the extra payments. They might apply them to principal and it ends up the same or they might place the extra payment in a non-interest "suspense" account waiting for the day you decide to skip a payment and apply it then or apply it at the end of the payment schedule. If the lender chooses not to apply the extra payments to principal you end up paying interest on money you've already paid back but that was not applied to the loan.

 

[ElFenix]

on their site it says amount applied to principal + interest = the amount i paid, including the overpayment. so it looks like it's being applied, just like it says on the back of the statement.


so as long as i don't skip a payment it shouldn't matter.

 

[IronWing]

on their site it says amount applied to principal + interest = the amount i paid, including the overpayment.

Was the amount of interest shown pretty much the same as the previous month's interest and was the amount of extra principal applied equal to the amount of principal called for that month plus the total of the extra payment amount? If so, then they applied the extra to principal and you''re good.

 

[FelixDeCat]

Normally if you extend the due date, nothing extraordinary will happen, especially if you have a scheduled automatic monthly draft set up.

Since Im willing to bet this is not the type of loan where extra principal exceeding another payment is counted as an advance payment of P&I (it should not, but some rule of 72 loans are), then the due date going forward should concern you, because you are saving no money in interest.

All doubt can be removed by simply examing the banks application of principal and interest payments when you pull up a loan history online (if available).

If your loans next payment is due for May 1, 2012 and not May 1, 2010 I would be afraid...very afraid.

 

[ElFenix]

it's only showing 3 months of history. and the amounts are all over the place. not only was february included but my required payment decreased by ~15% for march (though the rates didn't decrease much at all)

accessgroup's website sucks balls, btw. barely any info at all on it.

i suppose i'll have to dig up all my statements and put them in a giant spreadsheet to figure out exactly what is going on

 

[IronWing]

i suppose i'll have to dig up all my statements and put them in a giant spreadsheet to figure out exactly what is going on

That's what do with my home loan. Super anal spreadsheet with graphs for principal, interest, fees, and payment breakdown.

 

[ElFenix]

these statements don't even list the day the last payment was received/credited. wtf. who designed this crap?

Normally if you extend the due date, nothing extraordinary will happen, especially if you have a scheduled automatic monthly draft set up.

Since Im willing to bet this is not the type of loan where extra principal exceeding another payment is counted as an advance payment of P&I (it should not, but some rule of 72 loans are), then the due date going forward should concern you, because you are saving no money in interest.

All doubt can be removed by simply examing the banks application of principal and interest payments when you pull up a loan history online (if available).

If your loans next payment is due for May 1, 2012 and not May 1, 2010 I would be afraid...very afraid.

i'm confused between the two bolded statements. i basically pay it automatically (iow, i pay it every month with my 2nd paycheck in the required amount +, i don't do auto debit because i don't trust those fvckers with my bank account and i don't have the bank automatically do it because it changes every once in a while). so i'm not saving interest?

 

[FelixDeCat]

these statements don't even list the day the last payment was received/credited. wtf. who designed this crap?



i'm confused between the two bolded statements. i basically pay it automatically (iow, i pay it every month with my 2nd paycheck in the required amount +, i don't do auto debit because i don't trust those fvckers with my bank account and i don't have the bank automatically do it because it changes every once in a while). so i'm not saving interest?

Extending the due date and rolling the due date are different things but could be interpreted to mean the same thing if not more clearly defined by the lender. For example, payments are normally due on the first of the month but now the next payment is due on the 21st of the following month is "extending the due date" and I dont THINK should matter if you have the payments drafted on the first regardless of when its due (and you said you dont draft).

Rolling the due date would be to break up your payments, in advance (this usually requires your permission) over principal and interest well beyond the current due date. In this nightmare scenario, you would save nothing in interest because the bank earns all its due in advance, even though time has not passed. The only advantage would be the borrower could then "skip" payments until the calender month equals the loans next payment due date. If this is the case, I would have all the payments reversed and reapplied correctly.

If you cant get your statements to jive with your breakdown of P&I, I would just keep complaining (dont settle for confusing BS answers) until I get something satisfactory, including a breakdown of all payments (or at least the last 12) that show how your payments were applied to principal and interest. Then I would ask them if you have a "per diem or simple interest loan", which is very likely on a non mortgage. Those types of loans are very dependent on what day of the month in which your payment is applied because it affects how much interest you pay per payment. Lastly, ask them what the computer shows as your next payment due date. That will be telling.

I will watch this thread for updates because like I said above, you can settle for BS and doubletalk run around from someone trying to get you off the phone or you can push it up to a supervisor, or just keep calling until someone does what you ask.

 

[ElFenix]

Those types of loans are very dependent on what day of the month in which your payment is applied because it affects how much interest you pay per payment.

that's probably what it is. the statements seem to read that if i pay as of a certain day (always the first of the month), i will pay X amount in interest. i always pay less than that because i pay in the middle of the month. (though i'm under no illusions that i'm paying significantly less by paying immediately, i'm sure the statement shows about 6 weeks worth of interest)

i'll have to do the math for these last two statements. the first, dated 3/10, says $100.00 due 4/1. that's substantially less than my usual payment. the latest statement, dated 4/9, says 0.00 due 6/1. so i guess i owe nothing on 5/1 and nothing again on 6/1?