How far ahead are you on your bills?

[barkley]

I didn’t want him to have auto overdraft protection-on checking connected to his savings .

what we do/our adult kids as well-our credit union will let us choose whatever 'savings' account we want for overdraft so instead of what is truly our savings account we have a smaller separate one with a few hundred in it designated as the overdraft account in case something hiccups with a check or debit card transaction. we know that if any activity (absent interest being paid on it) occurs then something is up but the financial risk is minimized (i know bank will cover it if it's not our issue but it does take time for the process to happen so if it's a smaller amount i'm not stressed over it).

another safety feature we employ-our debit cards are not associated with any of our savings accounts. in a pinch if we needed to withdraw more than i have in checking i could do an online transfer and then it will be in my checking to pull but given the choice in an emergency (and absent any fees for doing so) i would rather use a credit card and then turn around and pay it a few days later.

 

[AndreaDM]

The only things I prepay are if I get a discount to do so, example, paying my car ins. 6 months at a time vs. monthly. Nope, not giving anyone else my money early.

 

[tvguy]

Yeah, you can't "pay ahead" on a car loan or mortgage. You will still owe a monthly payment until the loan is paid off.

On car loans it must depend on how the loan is structured. I just double checked, I have been paying ahead and Toyota says my next payment isn't due until March 2023. Yes, 2023.

 

[DLgal]

On car loans it must depend on how the loan is structured. I just double checked, I have been paying ahead and Toyota says my next payment isn't due until March 2023. Yes, 2023.

All my loans have always said that making extra payments will pay down the principal, and lower your monthly payments incrementally, but the payments will continue to be due monthly on the due date until the loan is paid off. I have my current auto loan through Honda Financial Services and our previous one was through our bank. There was no way to pay ahead and skip monthly payments on either one.

 

[tvguy]

All my loans have always said that making extra payments will pay down the principal, and lower your monthly payments incrementally, but the payments will continue to be due monthly on the due date until the loan is paid off. I have my current auto loan through Honda Financial Services and our previous one was through our bank. There was no way to pay ahead and skip monthly payments on either one.

Well, mine is a zero interest loan

 

[DLgal]

Well, mine is a zero interest loan

Maybe that's why. Mine is 0.9%.

 

[Turksmom]

We had a problem once: we had just moved into our first house, and they shut our water off on our second or third day living in the house! Something about the people who lived in the house before us -- they were a couple months behind on their bill, and when the company saw that the water meter was moving again, they stupidly assumed it was the old residents using water

The gas company did this to us. They consider any adults living in a household equally responsible for any charges. I instead of closing out the former owner's account, they just added my name- giving me an immediate past due balance of $850. I never received a notice because it was forwarded to the previous homeowner, who was listed first on the bill. This is why I don't use autopay for utilities

 

[DisneyHardin]

On car loans it must depend on how the loan is structured. I just double checked, I have been paying ahead and Toyota says my next payment isn't due until March 2023. Yes, 2023.

That's how Honda Financial does it too. I paid off the loan on our old van about a year early, but they didn't apply any extra payment to the principal, they just said I didn't owe anything the next month. I just kept up with how much we still owed and kept sending it in until it was paid off. In the past we had a car loan that was through Bank of America and on the payment stub each month, there was a line where you could add additional principal payments and then it would come off the loan as a whole and not reduce your monthly payment.

 

[Mackenzie Click-Mickelson]

On car loans it must depend on how the loan is structured. I just double checked, I have been paying ahead and Toyota says my next payment isn't due until March 2023. Yes, 2023.

That's how Honda Financial does it too. I paid off the loan on our old van about a year early, but they didn't apply any extra payment to the principal, they just said I didn't owe anything the next month. I just kept up with how much we still owed and kept sending it in until it was paid off. In the past we had a car loan that was through Bank of America and on the payment stub each month, there was a line where you could add additional principal payments and then it would come off the loan as a whole and not reduce your monthly payment.

Was/is there a way to specify the payment goes to principal?

On our mortgage if we didn't specify it would just roll over to the next bill as a credit. But my husband has it set up to pay an extra amount and specifically towards principal (the additional payment even reads that way on the bill). Our bill is the same each month but the term will be shortened (assuming we don't refi again) regardless because of this additional payment towards principal balance owed. Depending on how long we pay extra will determine how much is shortened.

 

[tvguy]

Was/is there a way to specify the payment goes to principal?

On our mortgage if we didn't specify it would just roll over to the next bill as a credit. But my husband has it set up to pay an extra amount and specifically towards principal (the additional payment even reads that way on the bill). Our bill is the same each month but the term will be shortened (assuming we don't refi again) regardless because of this additional payment towards principal balance owed. Depending on how long we pay extra will determine how much is shortened.

In my case on the auto loan, there is no interest so 100% of every payment goes to principal. When I had a mortgage and paid extra it automatically went to principal.

 

[Mackenzie Click-Mickelson]

In my case on the auto loan, there is no interest so 100% of every payment goes to principal. When I had a mortgage and paid extra it automatically went to principal.

Ah yeah none of the loans I've had make extra payments to principal. You have to specify that. An extra payment would just apply to the whole balance which included interest but wouldn't necessarily reduce your payment due or loan term. One of my student loans I learned the hard way to apply a payment after my payment EFT'd. If I made an additional payment before the payment had EFT'd it just wouldn't draft that payment owed which wasn't really my point of applying an extra payment lol.

 

[tvguy]

Ah yeah none of the loans I've had make extra payments to principal. You have to specify that. An extra payment would just apply to the whole balance which included interest but wouldn't necessarily reduce your payment due or loan term. One of my student loans I learned the hard way to apply a payment after my payment EFT'd. If I made an additional payment before the payment had EFT'd it just wouldn't draft that payment owed which wasn't really my point of applying an extra payment lol.

I finance a new car in 1987 and called to get the payoff and the person on the phone insisted I wouldn't save any money on interest since "we don't write simple interest auto loans". The contract said it was a simple interest loan. It was a small bank with like two branches, none close to me so I finally went in and showed them the contract. Their response was "it's a mistake, we don't write simple interest loans". But after working up the ladder of managers they finally admitted it was a simple interest loan.
Also had an issue when I refinanced my first mortgage. Same bank as the original mortgage, 4 years later. Loan officer disputed what our original down payment was. It was 5% down, and he insisted they always required 20% down. No computerized records at that bank yet in 1987 so they had to wait a day or so for the paperwork to be pulled from storage. We had another appointment and loan officer was speechless, he said he had never seen a 5% down mortgage written by his bank before. It was a special program the bank had that our realtor got us in. Turns out that program just about bankrupt the bank because so many people defaulted on the mortgages and the 5% didn't cover the banks costs of foreclosure.

 

[MrsPete]

... when the housing market crashed in '06 there were lenders that were on the hook for tens of thousands in unpaid water bills to the local municipalities.

How could anyone owe tens of thousands on a water bill? Wow.

... I just kept up with how much we still owed ...

This is key. YOU KEPT UP with your details. No one else will do it for you.

Something I thought about:
- As a teacher, I receive only 10 paychecks per year (August through May, no check in June or July). Our health insurance and other benefits are structured so that we pay 10 times per year ... but we have insurance 12 months a year. So, yeah, I hadn't considered that we are "paying ahead" for our summer insurance. This isn't a choice for us.
- The State Employee's Credit Union offers loans for teachers (mortgages and car loans) that have 10 payments per year /no summer payments.

 

[barkley]

you have to be VERY careful with any 0% interest loans with paying ahead. i worked in an industry that utilized them for decades (still does) and the way money was made in large amounts was due to consumers misunderstanding the very specific terms of their contracts-

a 90 day (or other term) 'same as cash' contract could be paid in part or full at any point prior to the termination date and so long as the loan amount was paid in full by the expiration date of the contract there were no fees/no interest, BUT

a 0% contract frequently was written such that a set minimum dollar amount had to paid 'every calendar month for the expressed life of the contract term'. paying in full so much as a day before the final monthly payment was due incurred fees and or interest. some were written such that prepayment incurred a prepayment penalty, some went a step further and had late fees and a retroactive interest rate that applied back to the full financed amount on the origination date of the contract in the hopes that someone would prepay and figure they could skip a month or two of payments. none of the penalties or retroactive interest was calculated until the day after the contract period ended-then it was months or years of retro interest, late fees...it was a nightmare for customers, our sales staff hated it and to the chagrin of the company that we contracted with as a lender took great pains to explain in detail to customers how to avoid the contract's pitfalls.

 

[barkley]

How could anyone owe tens of thousands on a water bill? Wow.

the massive ones were frequently a result of either a defaulted homeowner continuing to live in the home for a few years while foreclosure was occurring (it got to the point that the lenders were so overwhelmed people had stopped paying years before push came to shove on getting them out) or someone whose lender was more expedient but the homeowner knew what was going down way ahead of time (knew the writing was on the wall financially when they started shorting or skipping mortgage payments months earlier) so they watered their lawns for hours, left faucets running...anything to run up water usage. it was a means of revenge in their minds against the evil banks who 'tricked' them into over borrowing money they couldn't afford to borrow in the first place and were perfectly happy to exaggerate their incomes/earning potential for since no proof was required.

 

[sk!mom]

No , we are not ahead on our bills. We pay everything online so stamps aren’t an issue. We run everything possible through our cc for reward points so actually only have a handful of bills to pay. Our bills though are just the routine cost of living stuff, no debts. Well, I guess the cc is a debt but it’s paid in full every month.

When we had debts we wanted to pay off, like our mortgage, we made additional principle payments every month but debt reduction and principle payments is the only reason I can think of to do it unless there is an incentive from the company. For instance, we pay insurance bills in full rather than choosing the slightly higher monthly option.

Honestly, I think a wiser strategy and what gives us peace of mind is a healthy emergency fund. We have regular amounts moved to savings every payday and then at the end of the month we sweep everything left over into savings. I would rather do that than give the extra to the electric company or Allstate.

I would say that 2020 confirmed that decision. There were quite a few protections and forgiveness put in place for people with job losses.

No mortgage and a healthy savings account offers us the best protection against unexpected circumstances.

 

[tvguy]

you have to be VERY careful with any 0% interest loans with paying ahead. i worked in an industry that utilized them for decades (still does) and the way money was made in large amounts was due to consumers misunderstanding the very specific terms of their contracts-

a 90 day (or other term) 'same as cash' contract could be paid in part or full at any point prior to the termination date and so long as the loan amount was paid in full by the expiration date of the contract there were no fees/no interest, BUT

a 0% contract frequently was written such that a set minimum dollar amount had to paid 'every calendar month for the expressed life of the contract term'. paying in full so much as a day before the final monthly payment was due incurred fees and or interest. some were written such that prepayment incurred a prepayment penalty, some went a step further and had late fees and a retroactive interest rate that applied back to the full financed amount on the origination date of the contract in the hopes that someone would prepay and figure they could skip a month or two of payments. none of the penalties or retroactive interest was calculated until the day after the contract period ended-then it was months or years of retro interest, late fees...it was a nightmare for customers, our sales staff hated it and to the chagrin of the company that we contracted with as a lender took great pains to explain in detail to customers how to avoid the contract's pitfalls.

Being in California, I have to wonder aloud if that would be a violation of state usury laws. The Golden State, and state of laws.

 

[mrodgers]

The one bill you really don't want to pay late is your credit card bill -- ouch, the interest. I read somewhere it's smart to set up an automatic online payment every month -- enough to cover your minimum payment in case something weird happens (like you don't get your bill, or you get put on a ventilator with Covid). Then each month instead of paying your bill, you go in and change that automatic payment to your actual bill amount.
I don't do it, but it's a pretty good idea.

I pay the CC bill every payday. I track my CC usage like we use to track checking account registers and make a payment on payday for what I spent the past 2 weeks on last pay.

The rest is all recorded in an very elaborate Excel budget file. I do 2 week budget (pay period) vs monthly budget and half of each bill is in it's category for every paycheck. I have set amounts budgeted for non-service bills like gas, groceries, misc, and a category I toss money in for the kids which we use for whatever activity or going out for a meal that happens.

Car insurance is paid quarterly but money goes into savings each payday for it. Same with heating oil, $50 tossed into the savings waiting for winter to arrive.

Only other variable aside from heating oil is the electric. I toss $40/pay in the budget column and 8 months it builds up with only a $50-60 bill and the extra is there for summer with the AC unit going and the $120-130 bill.

I don't pay anything in advanced or send extra to anyone. I am still in the rebuilding stage from starting over with nothing.

 

[NYCgrrl]

I pay my co-op maintenance monthly charge once a year (and get a discount for doing so) and all other bills monthly. As long as I‘ve a roof over my head, I’m good.

 

[barkley]

Being in California, I have to wonder aloud if that would be a violation of state usury laws. The Golden State, and state of laws.

i suspect this skirts the usary laws (it was still being done in california when i left a decade ago). heck this type of loan may be exempt from california's usary laws just like the payday loan companies who charge as much as 460% annual rates.