Why is my balance on my car loan so high?

Question

I am financing $13,759 on my new car at 15.75% (this is my first new car). I have made 3 payments on time at $335, and my new balance is $13,559. I haven't yet heard a response from toyota financial about this, so I was wondering, does this sound right? It seems to me that my balance should be lower than that. Can someone explain this to me?

Wow, I appreciate the help a few of you gave...I didn't need a lecture from the others though. I know my interest rate is too high, but when you have 0 credit and no co signer, you don't have many options. I know the loan needs to be refinanced, but I realize that I'll have to wait longer than three months to do so. I know I'm taking a huge loss with my current interest rate, but I've gotta build up my credit somehow...I want a low interest rate on my first home.

Answer 1

Your loan payments combine interest and principal. In the early stages of the loan the interest is eating up most of your money-paid and the payoff of the actual amount borrowed is going down very slowly.

Answer 2

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Answer 3

Nope.. that sounds about right. Here's why.

Each month you must pay interest on the money you owe. This interest is calculated by dividing the annual percentage rate (15.75) by 12 giving a monthly interest rate of: 1.3125%. If you multiply the beginning monthly balance of $13,759 by 1.3125% you determine the interest accured for the month: $180.57. This accured interest will slowly decrease as your principle balance reduces. Now subtract that from your $335 payment and you are left with $154.43 to apply towards the principle and fee cost. You've made 3 payments which works about to about $460 to be applied against that principle balance leaving about $13,299.

So.. there seems to be about $330 missing. Now... remember that depending upon the day you inquire on the balance, the interest has accrued and therefore the payoff amount will vary based on the day of the month you've asking on. This still seems to be about $100 off..b ut I suspect there may be a fee that you may not be thinking about. Any late payments? If so, not only do you have the late fee but also the interest still accrues for the full amount until the payment is received. Even if your not 'late' but you pay after the actual due day, interest will accrue until they receive and apply the payment. This could easily compenstate for the difference.

Contact the finance offce at Toyota and get their perspective on it. I think you'll find the number is right.

Hope this helps and good luck!

Answer 4

That's because only a portion of the 3 payments you've made went to the principal and the rest goes to the interest which i also think is too high at almost 16%

Answer 5

At the beginning of a loan the vast majority of your monthly payment goes towards interest. The process of figuring out how much goes towards principle and interest is called amortization. It is totally in the bank's favor at the beginning of the loan.

As time passes a larger percentage of your payments will bring down the balance.

Answer 6

It's and interest pays off first loan or possibley it is amortized which is more comon in home loans. You should have never signed when you saw the %15.75. They would have started coming down right on the spot on interest. They once tried to stiff me for %18 when I got up to walk out they came down to 11.

Answer 7

If you financed through Toyota Financial your credit cant be that bad - go to your local credit union and ask a loan officer to refinance it. You might already have enough established credit with 3 payments. bring your most recent pay check stub and title (depending on your state)

Answer 8

Of your $335.00 payment most of it goes to interest without doing to math about 19 to 23 dollars goes to principle the rest is interest the bank wants their money first the longer you have the note the more will go to the principle hope the loan is short term

Answer 9

welcome to the real world..Try to refinance that loan.... mine is 5.50 % from a credit union.