Discover Personal Loan? Anyone have Experience?

[hall0731]

My husband and I took out a discover personal loan to consolidate debt. We are now in a positon that we can start paying more towards our debt. I have read online that if you make principle payments to discover that it goes towards the interest first and not the current balance. I told my husband we would not go back to disney until our debt was paid off. Now discover wants me to pay them 8000 interest on our 15,000 personal loan before they will apply the extra money to our balance. Has anyone had experience with discover or this type of loan? I don't want to wait 5 years to go back to disney, but I don't want to give discover all their 8000 up front.

 

[msmayor]

You have to go back to the original terms of the loan to find out what will be required.

How is the interest computed and applied? What method is used?

Did you agree to pay a fixed amount of interest based on the balance borrowed, or only interest for the time the loan is outstanding?

 

[dex08]

If you google you'll find several postings on Discover loans not being such a good idea because they add in the interest amount and force you to pay it even if you payoff the loan early -- even though their FAQs say there is no pre-payment penalty. There's no penalty because they consider that they have already added the compounded interest into your new debt with them. They probably had all of this info in their fine print in hopes you'd just click away or sign away to agree without reading in detail.

Many auto loans are calculated this way as well. Here's a blurb from a website regarding these types of loans:

Some lenders use the "Rule of 78's", which means that all payments go to pay off the full amount of the interest calculated on the loan before any payments are applied to principal. This ensures that no matter how quickly the loan is paid off, the lender gets the full amount of interest.

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Unfortunately, not sure if you'll be able to get out of paying the interest even if you try to get a different loan without such terms to replace the loan you took out with Discover.

 

[hall0731]

I am going to have to pull the docs out. I know when the bill comes in, we pay 350.56 a month and every month that goes by, less is given to interest and more to principle.I know the break down says we will pay 10000 on 15000. That is how they make their money come to think of it. My husband is going to call them tomorrow beings it is in his name and see what they say.

This is what it says on the bottom of our monthly bill we get:

"If you pay the current account balance shown on this statement, you will have a balance due of finance charges accrued from the date of your last payment to the date we receive your payment, plus any unpaid additional fees and/or finance charges that may have been added but not yet paid."

I understand the first part, but my question is are they going to tack on the rest of the finance charges for the remaining of the loan if I payoff early.

 

[dex08]

I am going to have to pull the docs out. I know when the bill comes in, we pay 350.56 a month and every month that goes by, less is given to interest and more to principle.I know the break down says we will pay 10000 on 15000. That is how they make their money come to think of it. My husband is going to call them tomorrow beings it is in his name and see what they say.

This is what it says on the bottom of our monthly bill we get:

"If you pay the current account balance shown on this statement, you will have a balance due of finance charges accrued from the date of your last payment to the date we receive your payment, plus any unpaid additional fees and/or finance charges that may have been added but not yet paid."

I understand the first part, but my question is are they going to tack on the rest of the finance charges for the remaining of the loan if I payoff early.

According to their FAQs site, YES, they will tack on the rest of the finance charge for the remaining loan if you payoff early.

http://www.discoverpersonalloans.com/ploans/html/customerservice/faq.shtml
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Q: Can I pay extra each month or make additional payments to pay my loan off early?

A: Yes and we won't charge you or penalize you for doing so.
(Please note you will not receive a rebate of any finance charges if you pay off your loan early). ​

Because they add compounded the interest and tacked on the total interest at the beginning, they've already added it into your total loan amount due.

 

[hall0731]

That is what I thought, just wasn't sure. I guess this will have to be a lesson we learn. Either way we are going to have to pay them. So I guess if I can get it paid off sooner including the interest, I can get to disney in 2014, which our daughter will be 4 and our son will be 14. I guess I can't complain. Thanks for all the help.