I bought a motorcycle from Honda at 9.9% interest. I was told that I could pay it off early if I wanted and that would effectively reduce my interest. So I pay extra on the monthly amount. The payment is $155 but I always pay $160 or better. The extra is supposed to go towards the principle but last month I paid $175 so $20 dollars is supposed to go towards the principle but they applied $11 more towards the interest and only $9 towards the motorcycle
What's up with this? I can't ask them about it until tomorrow.
So in essence my interest last month was $55 this month it was $ 65.
2007-03-19 14:37:39 · 6 answers · asked by phxfet 3 in Business & Finance ➔ Credit
The statement clearly states that any payments made in excess to the standard is applied towards the principle. There is no check box.
2007-03-19 14:53:46 · update #1
It is likely due to differences in the number of days between payments. If it is a simple interest loan, small differences in payment frequency have a large effect. You would have paid the $11 regardless of the extra payment. Simple interest actual balance calculation loans are date dependent.
2007-03-19 15:00:06 · answer #1 · answered by OPM 7 · 1⤊ 0⤋
You are wise to make additional payments to pay off a debt early. By doing so you will save money that otherwise would have gone to interest. Making additional payments does NOT lower the interest rate. When you make aditional payments
be sure that you specify that they are to go directly to principle.
If you don't specify this, companies often assume that they will credit to next month's payment. (Not giving you any benefit!)
If you want some unsolicited advice, you would be wiser still if you didn't borrow the money in the first place. Wise people don't borrow money. They lend it and invest it.
The borrower is servant to the lender. I realized a few years ago the bank has a nicer building than my home. The bank
has nicer furniture that I have in my home. So I have sacrificed and lived below my means. I have saved up an emergency fund. Paid off all my credit cards. Investing 15%\
of my salary in retirement (Roth Ira and Roth 401K)
I never borrow money and especially not on a depreciating
item like a car, mobile home, or motorcycle. Chevy is right
when they say their trucks are like a rock. Both drop in value like a rock drops into the deep ocean. Can you imagine a life without a mortgage payment and without
a car payment and without credit card bills of any type?
With a little discipline, life can be Very Good!
Best Regards.
2007-03-19 14:52:48 · answer #2 · answered by MARK 2 · 0⤊ 0⤋
It is always a good practice to submit principal reduction payments with a separate check clearly indicating that it be applied towards principal. Many time lenders will just apply the excess towards next month's payment and without a separate check you have little recourse to have the additional payment re-applied to principal reduction
2007-03-19 14:51:16 · answer #3 · answered by april p 1 · 0⤊ 0⤋
I agree with Jim C - always notate on the statement and on your check what the amounts should go to.
You might contact them and request they pull the past extra amounts back from the interest and apply those amounts to the principle
2007-03-19 14:49:53 · answer #4 · answered by echo 7 · 0⤊ 0⤋
You need to specifically tell them to apply the extra amount to the principal, otherwise they'll do just what they did. Somewhere on your statement there should be a check box, or if you pay online there is a checkbox, or if you pay at an office you need to tell them. If not that's money in their pocket you didn't need to pay. Write a note if there is no checkbox.
2007-03-19 14:42:22 · answer #5 · answered by Jim C 5 · 1⤊ 0⤋
Try the site below for information on this topic.
2007-03-19 14:45:09 · answer #6 · answered by citronge69 4 · 0⤊ 0⤋