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Old 06-30-2010, 01:42 PM
 
Location: Long Island, NY
275 posts, read 351,312 times
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Default Making extra payments on car loan question

I have a car loan at 3.99% for 5 years since last October. I have a little extra money that I want to throw towards the principal. But I'm going to have a little more extra money from work OT in about 2 months. I was going to hold off on paying more until I could throw a nice big fat piece of change at the principal.

I guess my question is, is it more prudent to pay extra whenever I have it or just save up and make one big payment towards the principal?

And also, since this is my first car loan ever, how do I make sure the extra money I send to the credit union is going towards the principal?

Also, what happens if/when I send the extra money? Does it lower the monthly payment due or just shorten the length of the loan?

Thanks for any advice.
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Old 06-30-2010, 01:55 PM
 
Location: North Metro Atlanta
4,759 posts, read 5,757,913 times
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When you send in the money, On the Coupon there should be a spot for additional Principal payments, Put it there. Sending it in now will reduce the total interest pay'ed on the loan by a little.

It will reduce the length of the loan, you still have to play the 'normal' amount until the loan is pay'ed off.
Check the loan online at your credit union, or call them few day after the payment is made and they can look it up to be sure it was done correctly
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Old 06-30-2010, 03:51 PM
 
Location: Boise, ID
5,361 posts, read 10,235,040 times
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It depends on the rest of your financial situation. Assuming you have sufficient savings to weather emergencies that might arise (like a job loss), and assuming that the money isn't making more than 4% where it currently is, then it is best to pay extra as you have it available. You'll save on the interest.

3.99% is pretty cheap interest, so if you don't have 6 months of living expenses saved up, I would keep the money in savings instead of paying extra.
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Old 06-30-2010, 04:12 PM
 
41,633 posts, read 44,854,191 times
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Why not just call the lender to ask these questions. Alot depends on the terms of teh loan as some how days from waht I have heard do not allow early payoff as far as being cheaper.In most loans it is going to lower monthly payents but payoff the laon with less interest paid.
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Old 06-30-2010, 04:33 PM
 
Location: Boise, ID
5,361 posts, read 10,235,040 times
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Quote:
Originally Posted by texdav View Post
Why not just call the lender to ask these questions. Alot depends on the terms of teh loan as some how days from waht I have heard do not allow early payoff as far as being cheaper.In most loans it is going to lower monthly payents but payoff the laon with less interest paid.
On every house and car loan that I've ever encountered personally, extra payments shorten the life of the loan, but monthly payments do not change. My husband just did this on a car loan with Chase, and the payment every month was $251.04 even though he was paying $500 to $1000 at a time.
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Old 06-30-2010, 05:13 PM
 
Location: Alaska
5,154 posts, read 9,052,078 times
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My experience has been that if you pay the extra with the regular payment, it reduces your principle. With some loans, they'll also treat it as extra payments, extending out the date before your next payment is due. If you pay extra between regular payments they'll usually charge interest up to that day and the next payment's interest portion will be less. In any case, the earlier you make an extra payment, the less interest you'll pay over the life of the loan.
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Old 07-05-2010, 08:54 AM
 
Location: Houston, TX
15,514 posts, read 15,154,703 times
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If you have 6 months expenses saved up in a CD or Money market for rainy days then yes I'd add a little extra on each payment. Paying off your car is often the best raise you can give yourself. If you have cc debt I'd pay that down first as its higher interest.
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Old 07-05-2010, 03:51 PM
 
Location: In America's Heartland
900 posts, read 1,049,847 times
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On most car loans, making extra payments will reduce the principle, not the monthly payments. Make sure you have 6-9 mo. emergency fund in place, then attack the car debt systematically each and every month. I agree with Oildog, make sure you don't have any other debt with a higher interest rate. If you do, kill it first.
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Old 07-05-2010, 07:54 PM
 
12,673 posts, read 13,067,761 times
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I only pay cash for a vehicle.
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Old 07-07-2010, 09:33 AM
 
Location: Niceville, FL
4,532 posts, read 8,255,556 times
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My current vehicle loan is through Chase Auto, and I've always 'rounded up' a bit when I've sent in my payment. If you don't specify otherwise, they've been rather random in how much of that overage goes straight to princpal and how much they say they're reducing the next payment by. And since I pay them through my CU's online banking option, I can't really specify which way to go. But to me it's just not worth sorting it out; I'll just be glad that the car's getting paid off three months early by rounding up by a couple frappacinos every month from the original monthly payment amount.
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