Simple interest loans and applying money towards principle

[foofighter]

on our R32 we just financed a few grand to take advantage of the 1000 owner loyalty program. Now let's say that I want to apply a couple of grand to the loan to bring down the principle...will that entire 2k go directly towards the principle or part of it will go towards interest? Or should i just hold off and wait and save up for the complete payoff and do that?

[VRsic]

I'm not sure how it works down there, but I had asked the leanholder of my dub if I could make two payments, one towards the principle, and then another towards interest. They would not allow it.

[badmyan]

Depends on the type of loan. The loan I have it goes to principle.

Originally posted by foofighter
on our R32 we just financed a few grand to take advantage of the 1000 owner loyalty program. Now let's say that I want to apply a couple of grand to the loan to bring down the principle...will that entire 2k go directly towards the principle or part of it will go towards interest? Or should i just hold off and wait and save up for the complete payoff and do that?

[foofighter]

this is your typical simple interest loan...or are there different types of simple interest loans?

[badmyan]

Ya fine. a genral car loan is normaly intrest calculated on daily balance or average monthly balance. Sometimes there is a very small amount extra for early termination.

There are a couple of loans out there however to avoid.

In one case there is a signiff**** penalty for paying it off early, where they charge you a portion of the intrest they would have otherwise earnt.

The second is where the loan and intrest are lumped together (table loan?) and that's the amount you owe.

Unless your credit sucks and you were a bottom feeder it's unlikley your loan fits into either category.

Originally posted by foofighter
this is your typical simple interest loan...or are there different types of simple interest loans?

[s4Rye]

Ask if it's possible to apply the $2K directly to principle. In most cases, it is possible, but you must specify it, otherwise they will apply part of it to the current interest due.

[foofighter]

thanks AFAIK VW credit doesn't have penalties for early payoff etc but i do agree that when i am sending in a chunk of dough that it be applied towards the principle rather than the interest

[JetBlue]

Just write out two checks and make a note on the bottom of one that it is a principal payment. Either that or contact VCI directly and have them deduct the amount directly from your bank account.

You are better off making payments now than waiting because you will save the interest on the amount you paid down.
MO

[DDR2]

with most places, the way it works is whatever interest is due is collected first, whatever's left including any amount greater than the minimum due goes to principle, unless there are other fees or charges owed of course. as far as i'm concerned (and i work for a company that also does auto financing), you can request a principal reduction only pmt.

make one payment with the entirety going to principle for that month. your next pmt will all go to interest accrued for 2 months and nothign to principal. just keep that in mind. at least that's how it works for my company. creditors will always get their cut as long as you keep the debt open (hint). if you keep the debt open for 3 years out of a 5 year term, you'll pay 3 years of interest no matter how many principle only payments you made in that time. but you'll also be saving 2 years worth of interest by paying off early. best way to do it if you want my opinion, is just make monthly payments like normal but pay above the minimum rather than just having one normal payment as principal reduction only. obviously the most ideal way of saving money is to pay cash or payoff asap.

ask the financing company if they offer biweekly payments at no extra charge. you can split the regular payment in half, pay that amount every other week. the principal will shrink faster that way and you'll end up saving money on interest alone and paying the note off faster. soem companies either charge for that service or dont' offer that at all. you should check. anyone with mortgages should check on this too.

[tcm glx]

Originally posted by foofighter
thanks AFAIK VW credit doesn't have penalties for early payoff etc but i do agree that when i am sending in a chunk of dough that it be applied towards the principle rather than the interest

Here is the deal with VCI, ( I know because i am on my fourth VCI Loan) When you pay more than the amount, say your car payment is $456.78 and you want to pay $460, it goes towards the total sum.......including interest. So if you finances $25,000 and with interest that works out to be $32,000, it goes towards the total $32,000. If you send a seperate check for $3.22, then that $3.22 goes straight to the $25,000. That is the way it was explained to me twice already from different finance managers at VW/Audi.

[tcm glx]

Originally posted by JetBlue
Just write out two checks and make a note on the bottom of one that it is a principal payment. Either that or contact VCI directly and have them deduct the amount directly from your bank account.

You are better off making payments now than waiting because you will save the interest on the amount you paid down.
MO

Oh yeah, forgot to mention the second check has to specify PRINCIPAL PAYMENT.....

[foofighter]

makes sense...i basically did a 2yr cuz the amount is so dam low. and figured i could pay the normal monthly and pay 2k into the principle

[MoRbiD]

foofighter:

While all here are making vaild points, the matter boils down to what are the rules set up in this regard by the note holder?

Case in point. I used my Credit Union to finance my A4 and they lowered my interest rate by .25% if I let them take the monthy payment out of my checking account automatically. Fine by me.

If I just transefer additional payments from my checking/savings account to the loan, those payments will be treated like any other payment (the one's they take out each month, principal+interest).

However if I call/stop in/ or mail a payment I can tell them I want it applied to "principal" only which will reduce the total amount borrowed.

Each lender has different rules, so posting the question here will get you alot of different answers.

Your easiest and best bet is to contact the lender and ask them.

Sorry for the long post.