Is it legal for a company to apply your payment to interest only and none on principal?

Question

even though on my personal check, it clearly states "principal only". FYI: this is a personal loan

Answer 1

Yes it is legal and if you read the fine print you will find it. Unless of course you are paying more than the payment due with a different check each month and write that on your check.

Answer 2

With most loans, you have to pay the interest first and then anything left will go to principal. This is how you bring the loan down. If you are not paying more than the interest that is accrued each month, then you are not going to be paying any on the principal. If you don't pay enough to cover the interest then the balance that you owe is going to go up.

The only time that it matters on how you want your payment applied is if you are making an extra payment. Like if you sent in a thirteenth payment for the year.

Answer 3

Yes, this is legal. Most loan companies actually pay off the interest for the entire term of the loan first and then start getting into the principal payments toward the end. Read your terms and conditions... most places will allow you to request where your funds are applied.

Answer 4

Interest is accumulated daily so the amount of interest depends on how many days between your payments. Interest must always be paid first, if there is anything left then it will go on principal. You should check and make sure your payments are enough to cover the interest and adjust accordingly. If you want a payment to go on principal make sure the interest is paid to date and add more money onto your check.

Answer 5

Payments are normally applied first to any interest that's due, then to principal. You can write whatever you want to on the check - it really doesn't matter. Even if they let you pay off principal first, you'd still owe them the interest, and they could charge interest on the unpaid interest, so what's the difference?

Answer 6

It could depend on the terms of the loan. Does the loan allow pre-payments? Get out your paperwork and start reading.

Answer 7

The old saying that the borrower is slave to the lender. You could fight them over it (spending more money) or simply take your business some where else . Read your loan contract (good luck understanding the terms) and see if there is anything stating that they can do that.

Answer 8

It's within the bounds of the law to charge you what ever they want and they can also change the terms at will. The law laws are made to screw the consumer. I checked what is covered by the "FTC" for you. It does'nt cover interest. Probably because the politicians get a kick back from it. You may want to check out the link below as far a learning how to read the terms and conditions. """Fair Credit Billing """"
Have you ever been billed for merchandise you returned or never received? Has your credit card company ever charged you twice for the same item or failed to credit a payment to your account? While frustrating, these errors can be corrected. It takes a little patience and knowledge of the dispute settlement procedures provided by the Fair Credit Billing Act (FCBA).
The law applies to "open end" credit accounts, such as credit cards, and revolving charge accounts - such as department store accounts. It does not cover installment contracts - loans or extensions of credit you repay on a fixed schedule. Consumers often buy cars, furniture and major appliances on an installment basis, and repay personal loans in installments as well.
What types of disputes are covered?
The FCBA settlement procedures apply only to disputes about "billing errors." For example:
unauthorized charges. Federal law limits your responsibility for unauthorized charges to $50;
charges that list the wrong date or amount;
charges for goods and services you didn't accept or weren't delivered as agreed;
math errors;
failure to post payments and other credits, such as returns;
failure to send bills to your current address - provided the creditor receives your change of address, in writing, at least 20 days before the billing period ends; and
charges for which you ask for an explanation or written proof of purchase along with a claimed error or request for clarification.
To take advantage of the law's consumer protections, you must:
write to the creditor at the address given for "billing inquiries," not the address for sending your payments, and include your name, address, account number and a description of the billing error.
send your letter so that it reaches the creditor within 60 days after the first bill containing the error was mailed to you.
Send your letter by certified mail, return receipt requested, so you have proof of what the creditor received. Include copies (not originals) of sales slips or other documents that support your position. Keep a copy of your dispute letter.
The creditor must acknowledge your complaint in writing within 30 days after receiving it, unless the problem has been resolved. The creditor must resolve the dispute within two billing cycles (but not more than 90 days) after receiving your letter. Lots of luck.