loans

amanda6035 · #1 01-31-2007, 01:36 PM

*disclaimer* I did a search, didnt see exactly what i was looking for.....

Oh my flippin god. I havent even graduated yet and I'm dealing with student loan crap. I wont have to start paying until november, because of the 6 month grace period...

Get this crap...I just recently learned when I read in a Suze Orman book (the money book for the young, fabulous and broke - I HIGHLY recommend it) that banks and lenders are freakin THIEVES when it comes to interest.

I have a loan on my car. My payment each month is $444. I have continually been paying $450 ever since I bought the car.

I read that book...and realized that my $6.00 extra each month was going to the damn interest - not the principal. I realize it's only $6.0....but STILL....I think I'm gonna have to start calling them and telling them "put this extra to my principal." I mean, whats the point in me paying more if it's not goign to lower the amount of money I actually pay?

So i just found out that my student loan will be the same way if I do it like that. I'm gonna owe roughly $180 a month. If I decide to send in $200, or $250, how the heck can I force them to put it towards my principal instead.

AUGH! Lenders are so sneaky! OOOh, we loaned you this money so you could do somethign better with your life, and we wanna screw you by taking anythign extra towards the full life interest, rather than letting you pay less because you so generously paid it off early. f*ckers.

Oh. I just re-read the promisorry note, which says "Payments submitted by me or on my behalf (exclusive of refunds) may be applied first to late charges and collection costs that are due, then to accrued interest that has not been capitalized, and finally to the principal amount."

I guess I'm screwed. I guess I wont be paying anything more than EXACTLY what I owe at the time I owe it. *sigh* I was really hoping to pay it off early, at a lower amount.

Does anybody else find this practice by lenders absolutely disgusting? Or does anybody know a way around it?

HBADPi · #2 01-31-2007, 02:13 PM

I dont know about student loans but I know on my mortgage payment there is a line where you can allocate money to "additional principal" only. Is there something similar on your forms?

Drolefille · #3 01-31-2007, 02:59 PM

You should be able to specify something like the above or make sure you write "Extra to Principal" on your checks. You can even contact your company and ask how this should be done. This should ensure that your payments are applied appropriately. (Disclosure: I work at a bank and am familiar with loan files, but things may work differently elsewhere)

Banks/Lenders are in this to make money. It's not surprising that they're going to pay off your interest first if they have a choice.

Xylochick216 · #4 01-31-2007, 03:11 PM

My student loans and car loan slips all have a box you can check to apply excess payment to principal. Pretty easy.

summer_gphib · #5 01-31-2007, 05:38 PM

I have sent a note in with the payment before, that says "apply the additional funds to the principal only." That was before I did everything on Bill Pay though. Now I just put that in on my Bill Pay Memo, and it seems to work.

Good luck!

Having just paid off $18,000 in credit card debt I feel your pain. We sent in every extra penny we could afford and got it paid off in 2.5 years.

amanda6035 · #6 01-31-2007, 06:37 PM

Thanks for all your responses - I will try to use the memo on my online bill pay from now on - I just wish I had known about this 3.5 years ago when I bought my car - how much money might I have saved over the life of the loan

Well, everyone's gotta learn sometime. I know now.

Drolefille · #7 01-31-2007, 06:40 PM

Yeah, I've learned a lot from working here, perhaps in addition to the 3 months at a restaurant and 3 months in retail, everyone should have to work 3 months in a bank!

aephi alum · #8 01-31-2007, 07:50 PM

Most lenders will apply any excess payment to interest first, unless you explicitly instruct them otherwise. If you make 2 months' payment at once, and don't instruct otherwise, they just won't send you your next bill; if you owe $200 a month and you send $400 in January, they won't send you a February bill on the assumption that you're prepaying your February bill rather than trying to put an extra $200 toward your principal.

My mortgage bills contain a space where you can write in an additional amount for principal and for escrow (they escrow for property taxes). We always throw a little bit extra toward principal and nothing toward escrow. On one occasion, I misread the bill and paid more than I had to, and the excess was applied to principal. (I love my bank.)

Oh... if you have several loans and you have extra money to apply to principal, apply it to your highest interest loan first. That means credit card debt, if you have any. By paying off your highest interest loans first, you'll be throwing away less money on interest over time.

aggieAXO · #9 02-01-2007, 12:17 AM

My school loans were held by Sallie Mae. The entire first year of payments(569/month) went to interest. Then for about 5 years about 50-100$ of this payment per month went to principal and the rest to interest(my payments went up to 622/month). Any extra money sent in was always applied first to the interest that had accrued for that month and then the principal (interest would accrued daily then a payment would be made and interest amount would go down to 0$ and start accruing again, so much per day-does this make sense?). I finally paid them off this last year but ended up paying about 65,000 dollars in interest (in addition to a 77,000 for the principal). I have been paying more towards my car and have noticed that they have not sent me a bill for February. I am still sending in a payment though. Student loans suck

Drolefille · #10 02-01-2007, 01:12 AM

Quote:

Originally Posted by aggieAXO

My school loans were held by Sallie Mae. The entire first year of payments(569/month) went to interest. Then for about 5 years about 50-100$ of this payment per month went to principal and the rest to interest(my payments went up to 622/month). Any extra money sent in was always applied first to the interest that had accrued for that month and then the principal (interest would accrued daily then a payment would be made and interest amount would go down to 0$ and start accruing again, so much per day-does this make sense?). I finally paid them off this last year but ended up paying about 65,000 dollars in interest (in addition to a 77,000 for the principal). I have been paying more towards my car and have noticed that they have not sent me a bill for February. I am still sending in a payment though. Student loans suck

yeah, you may have ended up on the payment plan that does that whether by default or by choice. I see a lot of the plans that go up gradually over 5, 10, 20 years. I'm glad mine are consolidated at a low rate and I just did the standard payments.

aggieAXO · #11 02-02-2007, 02:17 AM

Unfortunately when I graduated the rate was 8.75%.