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question about car loan

Posted by on Sep. 28, 2013 at 5:22 PM
  • 7 Replies
This is my first car loan, so sorry for my stupid question lol. I was wondering why the payment that I made on september 26(payment due on 1st of every month) all went to interest. Is that a good thing? I made a principal payment on september 6, so idk if that has something to do with the monthly payment all going to interest. In previous month, my monthly payments($417.38) was automatically split between interest & principal. Here's my transaction history:
May 31: $417 (interest:227.40 principal:$189.98)
July 1: $800 (interest $218.33 principal: $581.67)
July 22: $417 (interest:$143 principal: 273.58) I made separate principal payment of $282.62 also.
Sept 6: Made principal payment of $500
Sept 26: monthly payment of $417.38 & this time it shows it all went to interest.


Edit: I could've swore the finance lady at the dealership said that my interest would be less if I make principal payments. I guess that's why I'm cobfused. I thought my interesr would've been lower on this payment.
by on Sep. 28, 2013 at 5:22 PM
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Replies (1-7):
iamcafemom83
by Rah-Rah on Sep. 28, 2013 at 5:25 PM
I would think because your previous payment was all principal. But, maybe a call to the bank would clear it up?
funmommy123
by Ruby Member on Sep. 28, 2013 at 5:27 PM
Have to call them on monday.

Quoting iamcafemom83:

I would think because your previous payment was all principal. But, maybe a call to the bank would clear it up?

Alwaysmotivated
by Silver Member on Sep. 28, 2013 at 5:30 PM

I am assuming that like a house payment first couple of years of payments made all go to interest and then as the interest goes down it then trickles over to your principal.. This is how finance companies make their money, getting the interest up front.. If you should default, this way they would have gotten some interest and their vehicle back and able to make money again.. (but like the other mom said, it would be better to call your finance company to get a better understanding)

funmommy123
by Ruby Member on Sep. 28, 2013 at 5:34 PM
I'm planning on calling Monday. We went trhough the dealership's financial place. I freak out about everything, especially things I'm confuswd about lol. Thought someone on cafemom would kbow a little something about it & could explain to me til then :)

Quoting Alwaysmotivated:

I am assuming that like a house payment first couple of years of payments made all go to interest and then as the interest goes down it then trickles over to your principal.. This is how finance companies make their money, getting the interest up front.. If you should default, this way they would have gotten some interest and their vehicle back and able to make money again.. (but like the other mom said, it would be better to call your finance company to get a better understanding)

Alwaysmotivated
by Silver Member on Sep. 28, 2013 at 5:38 PM

understand totally, I am curious to hear what they say as well :)

Quoting funmommy123:

I'm planning on calling Monday. We went trhough the dealership's financial place. I freak out about everything, especially things I'm confuswd about lol. Thought someone on cafemom would kbow a little something about it & could explain to me til then :)

Quoting Alwaysmotivated:

I am assuming that like a house payment first couple of years of payments made all go to interest and then as the interest goes down it then trickles over to your principal.. This is how finance companies make their money, getting the interest up front.. If you should default, this way they would have gotten some interest and their vehicle back and able to make money again.. (but like the other mom said, it would be better to call your finance company to get a better understanding)


Pnukey
by on Sep. 28, 2013 at 5:57 PM

Generally, with a car loan, the majority of the payment goes to interest. Gradually, a higher percentage of each payment goes to the principal until it is eventually paid off. You also have to be sure to specify any extra payments as "principal payments" or they will just pay the interest. It is bad when it all goes to interest because the principal is not getting smaller, so it will never get paid off.

If you have made extra payments and correctly labeled them for principal, you need to call the loan people so they can fix it. It's very possible they didn't enter it correctly.

funmommy123
by Ruby Member on Sep. 28, 2013 at 6:06 PM
Bump
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