paying it off quicker how to(s)

[GottaBeTRD]

Hey T4R family, i did a search and couldn't find anything in this topic exactly so if there is something please point me in the right direction.

Here is my scenario. I want to pay my truck off quicker and i am financed through Wells Fargo Dealer Services at about 7% interest

here is my situation My original payment was something like $320 a month but ever since I've owned it I've paid around $350 each month. Now, doing this has made my amount due each month go down gradually. right now it is to about $150

I still pay $350 each month but my question is: Is this the same as if i were to make 2 payments? One at the required amount and the extra goes to the principle? I'm totally stumped on this and the back wont give me a straight answer.

thanks in advance. any advise would be appreciated!

 

[JackOSU]

From what I recall and my experience you have to specify to the bank that any over payment be used towards the principal and not just to do what appears to be happening where they just reduce the next payment due.

Reason being is that they are still making their same interest long term for the loan instead of things calculating off of a lower principal. Maybe a savvy financial member could elaborate on this better than I.

 

[GottaBeTRD]

yeah thanks for your input. I called them a while ago and they said that it was good to pay extra. But they could be saying that cause im just making their wallets bigger.

It only ever shows my principle ballance on my statement, i just went and did some math, I subtraced the amount from the the previous ballance and only like $280 of the $350 goes to the principle... im so lost??

I hear that making 2 payments a month is better but I dont know if there is a difference in what im doing now. hopefully a finance expert owns a 4runner and is part of the forum lol!

 

[Justinlhc]

Play with this for a while:
Auto loan calculator - Bankrate.com


The way I see it is if you do this through the entire loan until it's paid off you will save a huge chunk of interest and have it paid off sooner. Click on the "show/recalculate amoritization table" to see EXACTLY what's going on with the principal and interest payments each month.

Basically what's going to happen is you will eventually be several payments ahead, but you will be saving quite a bit in interest.

 

[Justinlhc]

I got bored so here ya go:

$19,000
7% interest for 6 years= $323.93 per month and you will pay $4,323.04 in interest over the 6 year loan.

If you pay an additional $26.07 to make the payment an even $350 each month you will only pay $3,913.16 in interest and have your loan paid off about 7 months sooner.

So you paid $350 per month for 65 months=$22,750
Instead of $323.93 for 72 months=$23,332.96
So you saved $582.96 in interest and paid it off 7 months early

 

[GottaBeTRD]

awesome thanks for taking time to figure that out. I'm going to play with that calculator and see if i can do it even sooner. the more money i can save would be awesome!

 

[ronp8]

From what I recall and my experience you have to specify to the bank that any over payment be used towards the principal and not just to do what appears to be happening where they just reduce the next payment due.

Reason being is that they are still making their same interest long term for the loan instead of things calculating off of a lower principal. Maybe a savvy financial member could elaborate on this better than I.

Hmmm I thought that it was automatically applied to your principal if you pay extra.

 

[JackOSU]

Hmmm I thought that it was automatically applied to your principal if you pay extra.

Most of the time it is. Some times it isn't though if your bank's loan terms state so. I just had a buddy of mine who thought for over a year he was knocking down his long term interest when in reality he was just making his future payments lower and not saving any money really.

I know on my loan you have the option online to make the normal payment and then a seperate section to apply payments to pay down the principal. Just something to think about and check into is all.