Does It make the amount I will be paying for financing down.
2006-06-17 04:26:58 · 9 answers · asked by Anonymous in Cars & Transportation ➔ Buying & Selling
I have not bought the truck yet I am buying it on monday. I will have a high interest rate, but I make good money so I was going to pay half or more of whatever my payment is extra towards principal, or i mean I will pay that much extra. If my payment is 450/mo. I will pay an extra 225 towards principal. If I do that for a while like 6 mos will it make my interest rate go down.
2006-06-17 04:40:53 · update #1
You have to determine the type of loan you are getting: Simple interest loan is probably what you are getting since this is the most expensive for you. The interest is applied to the unpaid balance, therefore the more you pay toward the unpaid balance, the less interest you will pay.
On a compound interest loan, the interest is added into the loan and you have to pay it off sap and you will be refunded the interest that you paid. This is a better loan in the long run.
Read your contract or get someone to help you know what you have, do not take the advice of the salesman.
2006-06-17 05:29:24 · answer #1 · answered by geoff 3 · 0⤊ 0⤋
Probably not. Most vehicles are financed under the "Rule of 78s". Interest is collected in the early part of the loan. The finance company makes the same no matter how much you prepay the principle.
If you want lower payments, increase the down payment.
If the vehicle was financed differently, then you will have to explain the loan structure.
2006-06-17 11:35:03 · answer #2 · answered by Exec. Dir. 1 · 0⤊ 0⤋
Depends on your interest rate. If you pay more on the principal, yes, it will decrease your overall interest paid. Think of it as a tier, each payment is split between interest and principal. At the beginning of the loan, it is almost a 85% interest vs 15% principal. Each payment the interest goes down a bit and the principal goes up a bit.
2006-06-17 11:31:24 · answer #3 · answered by hswatsonaz 3 · 0⤊ 0⤋
Yes, the finance charge is only applied to the outstanding balance. So if you reduce the balance, the amount of interest charged goes down.
1% of $10,000 is less than 1% of $10,100. The amount you pay goes down but the rate stays the same.
Be sure to ask the people taking the application. There is a ton of misinformation posted here.
2006-06-17 11:31:13 · answer #4 · answered by Anonymous · 0⤊ 0⤋
If you make payments above the minimum monthly payment and it is applied to principal then you will be decreasing the amount of interest (in terms of dollars) you are paying on the truck.
2006-06-17 11:30:58 · answer #5 · answered by rockinout 4 · 0⤊ 0⤋
That's a good plan. Interest is calculated on the remaining balance. You wont have to pay as long either which reduces the interest further. Your payment amount will not be reduced though.
Ask before you sign anything and read the fine print.
2006-06-17 13:52:49 · answer #6 · answered by webman 4 · 0⤊ 0⤋
Yes, pay the truck off as fast as you can. Whatever you pay over the minimum payment do is applied to the principle; then in interest is lower because the balance/principle is lower.
You should read your loan agreement. The answers might be in there... (Like "no penalty" for paying in advance...)
2006-06-17 11:34:37 · answer #7 · answered by cosmosclara 6 · 0⤊ 0⤋
u can make payments to principal, but it won't effect the finance charge. it will take you less time to pay the truck off.
2006-06-17 11:31:28 · answer #8 · answered by koifishlady 4 · 0⤊ 0⤋
No. It doesn't matter how many payments you make. The only way to make your finance charge go down is simply by refinancing.
2006-06-17 11:30:35 · answer #9 · answered by houstonmom77064 3 · 0⤊ 0⤋