Hi everyone, I financed a car in June of 2006. The original loan payment was about $336 a month for 72 months with an APR of about 9%. I financed something over $18,000. I figured I would send in an even $340 every month. Since then, my payment has continued to lower and lower, to the point where the last payment was only $280. My question is, why has it lowered? Also, if I pay only the lower amount, will the next payment go back to the original amount of $336? I would like to try sending them the $280 and then the extra $60 as a principal only payment, but I'm afraid then it will go back up and do more harm than good. Basically, I would like to have this loan paid off way before 72 months to avoid paying all that interest. What is my best option? Sorry for all the questions. Kinda new to loans and money and all this. Thanks!
Well really the only way to actually pay it off before then is to pay higher amounts per month. It's not like there is a secret way to pay it off earlier without having to actually pay more money and faster.
I was told that if you send in more money than what you owe per month, and tell them to apply it to the primary total, you can pay off the loan faster.
I think that what they are doing is adding the extra amount that you pay each month to the next months payment, so that you have to pay less the next month, but the moment that you pay the lesser amount, the amount to be paid will be what it was originally. They are doing this to get to pay the lesser amount to try to keep you paying all the way through the loan period. They don't want you to pay it off earlier, because they make less money from you.
Just pay more than the minimum says you have to pay. Once the balance hits $0 they can't charge you any more, so the faster you get there the better. Just make sure there aren't any penalties for paying it off early.
