I bought a truck last December. I financed it through our credit union. We hadn't ever financed a vehicle through this credit union. We had carried a credit card, house re-fi, and home equity loan (back in the bad old days when we did home equity loans) through this credit union, but never a vehicle loan. The dealers always beat their rates, typically by 0.1% point. So, I wasn't really sure how the CU worked the loan if paid ahead.
Some months, I've been rounding the $378 minimum payment up to $400. I had been wondering if the minimum due would gradually ratchet down - like $1 less due per month for every $36 that I was paid ahead on the loan (it's a 36 month loan). But, the payment has never been adjusted down at all, which is fine. I wanted to pay AT LEAST $378 per month, and have the truck paid off earlier. I just figured that the CU would make some adjustment to keep me paying on the loan for the full 36 months - more interest income for them.
Last week, I made a substantial payment ahead. I decided to pay 10% of the remaining balance. The remaining balance was $10,220, so I paid $1,022 (About $16 of that payment went toward accumulated interest. Had I been thinking more clearly, I would have increased the payment so that the principal balance had gone down 10%). I went to the CU website this morning just to check if the payment went through. It did. And, yep, the amount due with the next payment remains $378. What changed is the date the payment is due! I don't owe anything on this truck until December 1!
Of course, I plan to make my Sep., Oct., and Nov. payments. We also still haven't decided if we're going to pay this off entirely with the gift money.
Either way, we're hopefully getting ourselves well positioned to pay this truck off, and start saving cash to buy a replacement family van in a few years. I'm not saying we won't finance it, but we will hopefully at least make a substantial down payment.
The Truck Payment
August 19th, 2013 at 12:28 pm
August 19th, 2013 at 12:49 pm 1376916563
You really don't want them using the extra towards future payments. You need to tell them what to do with the extra...specifically apply it to principal. They won't make this assumption because the longer your balance is higher they earn more interest. If the extra is applied NOW to lowering the principal balance then less interest is applied and you will actually pay the loan off earlier.
August 19th, 2013 at 01:11 pm 1376917874
$1,005.39 of my payment went toward principal, and $16.76 went toward interest. My next payment of $378 is due on 12/1/13.
August 19th, 2013 at 01:21 pm 1376918461
August 19th, 2013 at 05:58 pm 1376935133