steveorino 7 #1 September 30, 2008 I owe 12K and make $275 monthly payments on a car loan. i want to pay it off in a year. I'm saving $200 a week to do so. Should I save until I have the payoff or am I better off paying $200 on each week or an extra $800-1000 a month on principle as I make the regular $275 monthly payment? steveOrino Quote Share this post Link to post Share on other sites
skydiver30960 0 #2 September 30, 2008 IMHO, if you really don't need the money for anything else, then you're better off paying off what you can as soon as you can. If you choose to save up until you have the full amount, you'll only be earning the interest rate of your savings account as it sits in the bank, but your debt will be accruing interest at whatever rate your loan is at. Compare the two rates: without a doubt, your debt will increase faster than the rate you're earning interest in your savings acct. EDIT: Crapspackle. I didn't really READ your question. As to whether to pay off each month or do it weekly, it depends on how your loan institution compounds interest. If they do it continuously (damn, I hope not) or weekly (still hope not) then it behooves you to pay off weekly. If they only do it monthly, then once a month will be enough, just try to get your payment in before the date they compound the interest. Elvisio "not a financial guy, but tangled with debt in the past" Rodriguez Quote Share this post Link to post Share on other sites
Broke 0 #3 September 30, 2008 Do you have any penalties for paying the loan off early? I would say it is better to make the bigger payments, as opposed to making one huge payment. If you pay more of the principal it should bring the interest of the loan down.Divot your source for all things Hillbilly. Anvil Brother 84 SCR 14192 Quote Share this post Link to post Share on other sites
JohnRich 4 #4 September 30, 2008 QuoteI would say it is better to make the bigger payments, as opposed to making one huge payment. If you pay more of the principal it should bring the interest of the loan down. Ding Ding Ding! Quote Share this post Link to post Share on other sites
squirrel 0 #5 September 30, 2008 QuoteQuoteI would say it is better to make the bigger payments, as opposed to making one huge payment. If you pay more of the principal it should bring the interest of the loan down. Ding Ding Ding! next step...go be a politician....they seem to need some help in this area. ________________________________ Where is Darwin when you need him? Quote Share this post Link to post Share on other sites
PLFXpert 0 #6 September 30, 2008 If you pay weekly bills, then I'd say weekly. Personally, I prefer to do the bills (energy, mortgage) monthly and if I'm paying any down I do so at that time. Either way, better to do so as you go in this scenario, imo. Having said that, we're just talking "a year" here and I have a feeling you will do as you intend so...frankly it really doesn't matter all that much. I've been accused of thinking too much myself. Paint me in a corner, but my color comes back. Quote Share this post Link to post Share on other sites
popsjumper 2 #7 September 30, 2008 Send the cash to me. I'll handle it for you. Small bills, please. My reality and yours are quite different. I think we're all Bozos on this bus. Falcon5232, SCS8170, SCSA353, POPS9398, DS239 Quote Share this post Link to post Share on other sites
Broke 0 #8 October 1, 2008 QuoteQuoteQuoteI would say it is better to make the bigger payments, as opposed to making one huge payment. If you pay more of the principal it should bring the interest of the loan down. Ding Ding Ding! next step...go be a politician....they seem to need some help in this area. Don't get me started on this one or it will go to the SC and I don't like going in there... I don't have the time for that forum.Divot your source for all things Hillbilly. Anvil Brother 84 SCR 14192 Quote Share this post Link to post Share on other sites
blacklabjumper 0 #9 October 1, 2008 Steve, I will give you my expert opinion (I am a VP of lending for a major financial institution). Don't hold it against me. I did not create the current situation. I am left to clean up everyone else's mess. But back to the matter at hand. It would be best to continue to make your monthly payments and apply the additional each month. If you send a check every month then you will want to send 2 checks. One check will be for the regular monthly payment and the second check will be the additional money that you want applied directly to the principle of the loan. be sure to write "apply directly to principle" in the memo section of the second check. If paying on computer just make 2 separate payments, making sure the first payment made is the regular monthly payment. This method of payment will have a positive effect on your credit score, since one the factors in determining someone's credit score is the current outstanding debt compared to the high credit limit of each creditor. Since this is an installment loan, your high credit on this account would be the original balance of the loan. Your credit score will increase if you just pay the loan off but the increase will be smaller than doing it the way I suggested. I hope this helps.Rodriguez Brother #1626 Dudiest Skydiver #1962 DPH #-2 Quote Share this post Link to post Share on other sites
Squeak 17 #10 October 1, 2008 Quoteregular monthly payment and the second check will be the additional money that you want applied directly to the principle of the loan. be sure to write "apply directly to principle" in the memo section of the second check.. We might do thing a bit differently here, but how does one apply monies "directly to the principle" if you have a loan outstanding which accrues interest, is that interest not simply applied to the outstanding balance? So therefore any extra money applied to the load comes off of the outstanding balance, which would include the principle plus interest so far? Does it work differently there?You are not now, nor will you ever be, good enough to not die in this sport (Sparky) My Life ROCKS! How's yours doing? Quote Share this post Link to post Share on other sites
FlyingJ 0 #11 October 1, 2008 QuoteQuoteregular monthly payment and the second check will be the additional money that you want applied directly to the principle of the loan. be sure to write "apply directly to principle" in the memo section of the second check.. We might do thing a bit differently here, but how does one apply monies "directly to the principle" if you have a loan outstanding which accrues interest, is that interest not simply applied to the outstanding balance? So therefore any extra money applied to the load comes off of the outstanding balance, which would include the principle plus interest so far? Does it work differently there? Not sure if it works the same with all banks over here, but my monthly payment on a loan is a combo of principal/interest. Any additional payments I choose to make in that month go 100% to principal, lowering the principal amount interest will be calculated on the next month.Killing threads since 2004. Quote Share this post Link to post Share on other sites
BIGUN 1,496 #12 October 1, 2008 The type of car in the forum might change the answers. Here's my $.02. Apply 50% of the $800 to savings and the other 50% towards the principle of the vintage corvette. A lot can happen in a year and you would 1) have $4,800 in savings and, 2) could still sell the car a year from now for its current value and/or/if pull the appreciation plus that $4,800 back out.Nobody has time to listen; because they're desperately chasing the need of being heard. Quote Share this post Link to post Share on other sites
JohnMitchell 16 #13 October 1, 2008 If the interest rate is low and you can invest your spare money at a higher rate of return (subtracting taxes paid on that return on investment), then save and invest until you have enough to pay off the loan, or even just keep saving and investing and pay off that cheap loan slowly. But if the interest rate on the loan is higher than any return on investment (pretty likely these last few months) pay down the principal as much as you can each month. There, I've settled it! Quote Share this post Link to post Share on other sites
blacklabjumper 0 #14 October 1, 2008 Squeak, this is how it works. The amount of interest is calculated on a daily basis on the current loan balance. hat is why at the beginning of the loan a majority of the payment goes towards interest and very little towards the principle. This division of the payment reverse it self as time goes on. Approximately halfway thru the lloan term the payment would almost be split down the middle. if you send 2 checks, the first one for the regular monthly payment amount covers the interest that has accrued since the last payment and the amount left over from that payment is applied to principle. By applying the second check after the first on the same day, then no interest has accrued because they were made on the same day.Rodriguez Brother #1626 Dudiest Skydiver #1962 DPH #-2 Quote Share this post Link to post Share on other sites
Broke 0 #15 October 1, 2008 Then the bank gets pissed off because they have to re calaulate the interestDivot your source for all things Hillbilly. Anvil Brother 84 SCR 14192 Quote Share this post Link to post Share on other sites
Squeak 17 #16 October 1, 2008 QuoteSqueak, this is how it works. The amount of interest is calculated on a daily basis on the current loan balance. hat is why at the beginning of the loan a majority of the payment goes towards interest and very little towards the principle. This division of the payment reverse it self as time goes on. Approximately halfway thru the lloan term the payment would almost be split down the middle. if you send 2 checks, the first one for the regular monthly payment amount covers the interest that has accrued since the last payment and the amount left over from that payment is applied to principle. By applying the second check after the first on the same day, then no interest has accrued because they were made on the same day. Sounds similar to here, with every loan i have had (including my mortgages) i have always paid more than the possibly monthly interest accrual, therefore always paying into the principal. It just strikes me as odd that you would need to specify that the 2nd check is is for "principal only"You are not now, nor will you ever be, good enough to not die in this sport (Sparky) My Life ROCKS! How's yours doing? Quote Share this post Link to post Share on other sites
PLFXpert 0 #17 October 1, 2008 QuoteIf you send a check every month then you will want to send 2 checks. One check will be for the regular monthly payment and the second check will be the additional money that you want applied directly to the principle of the loan. be sure to write "apply directly to principle" in the memo section of the second check. I've never heard of writing two checks. FWIW, I write one check and write on both the portion I send with the check and in the memo section of the check itself "X amount to be applied toward principle" and it's always applied correctly. My mortgage coupon actually already comes with the various sections where you can write in the amount you want applied to the appropriate category (extra monthly payment, additional interest or extra principle).Paint me in a corner, but my color comes back. Quote Share this post Link to post Share on other sites
futuredivot 0 #18 October 1, 2008 Quote It just strikes me as odd that you would need to specify that the 2nd check is is for "principal only" Agreed, it is messed up-but that's the way it works. I got burned once by not specifying and they applied my extra to the next scheduled payment which let them charge interest for the higher principal.You are only as strong as the prey you devour Quote Share this post Link to post Share on other sites
blacklabjumper 0 #19 October 1, 2008 In a perfect world you would not have to specify. I suggested doing the 2 check method for just the reason Divot mentioned. You don't have to do it that way but I believe it is the best way to insure that money is applied properly.Rodriguez Brother #1626 Dudiest Skydiver #1962 DPH #-2 Quote Share this post Link to post Share on other sites
pirana 0 #20 October 1, 2008 QuoteThen the bank gets pissed off because they have to re calaulate the interest (Guy in back room with abacus and opening the mail): Ah FUCK!" . . . the lust for power can be just as completely satisfied by suggesting people into loving their servitude as by flogging them and kicking them into obedience." -- Aldous Huxley Quote Share this post Link to post Share on other sites
wildcard451 0 #21 October 1, 2008 Hmmmm, great thread seeing as how I just bought the first car that I needed a loan for in July. I've already overpaid enough that I am one month ahead. Just got off of the phone where she told me that everything I overpay goes automatically to the principle, but unless my understanding is flawed, if it is going to the principle, it shouldn't be letting me skip a month of payments......right? Oh well, looks like I will start sending two damned checks. That's annoying. Quote Share this post Link to post Share on other sites
tetra316 0 #22 October 1, 2008 Right. It's going to next month's principle. Quote Share this post Link to post Share on other sites
blacklabjumper 0 #23 October 2, 2008 correct if they are saying you are one month ahead then they are not applying the funds properly. If the funds were applied correctly, you still pay every month.Rodriguez Brother #1626 Dudiest Skydiver #1962 DPH #-2 Quote Share this post Link to post Share on other sites
DrewEckhardt 0 #24 October 2, 2008 QuoteI owe 12K and make $275 monthly payments on a car loan. i want to pay it off in a year. I'm saving $200 a week to do so. Should I save until I have the payoff or am I better off paying $200 on each week or an extra $800-1000 a month on principle as I make the regular $275 monthly payment? You're bettering paying off whatever you can IMMEDIATELY. Even if you have good car loan (7%? it's been a while since I bought my car) and savings rates (4% down at the local credit union which becomes less than 3% after the government gets their cut) the spread is huge. Quote Share this post Link to post Share on other sites
billeisele 130 #25 October 2, 2008 Quote Right. It's going to next month's principle. not sure this is right I think that any extra funds that go towards principle reduce the principle balance and are subtracted from the final payment that would have been due at the end of the loan and to the original question, no you can not skip the next months paymentGive one city to the thugs so they can all live together. I vote for Chicago where they have strict gun laws. Quote Share this post Link to post Share on other sites
