Paying off car loan early

[britfish]

We have our car loan through a credit union. We had just received a statement with the loan balance and a few days later I called for a payoff rate because we would like to pay it off about 16 months early. Now that I am looking at the payoff amount she gave me, it is actually higher than the statement balance by about $15.
Of course I will call Monday, but shouldn't we be saving money by paying it off early?

 

[abolanwoski]

The payoff amount that she gave you on the phone is the amount of the balance of the loan as of the last statement (let's say your statement was printed on the 30th of last m0nth) plus any interest accrued from that day until the day you called for the payoff amount. So no, your payoff will NEVER be less than you loan balance and will only be the same if you pay it off on the same day as your statement is calculated/printed.

The "savings" in paying off early comes from not paying the 16 months worth of interest that will be added with each months payments. That coming interest doesn't appear in your principle balance.

 

[britfish]

The payoff amount that she gave you on the phone is the amount of the balance of the loan as of the last statement (let's say your statement was printed on the 30th of last m0nth) plus any interest accrued from that day until the day you called for the payoff amount. So no, your payoff will NEVER be less than you loan balance and will only be the same if you pay it off on the same day as your statement is calculated/printed.

The "savings" in paying off early comes from not paying the 16 months worth of interest that will be added with each months payments. That coming interest doesn't appear in your principle balance.

ahhhh....so the balance is the principal and then the intereste gets added on to that each month?

 

[bdcp]

ahhhh....so the balance is the principal and then the intereste gets added on to that each month?

Yes. I just paid my car off 14 months early and now I'm working on DH's. I did it by sending $200/month extra to the payment. (some months less, but always more than the minimum). I have paid off every car we've ever owned early.

 

[disneychrista]

What is your monthly payment? Multiply that times the number of payments left. Now compare the two...your savings is the difference between the two (interest).

 

[rhax07]

Paying more than the minimum is always suggested if possible. The interest you save keeps less money out of Big Business' pockets and more money in yours for more Disney Vacations!

 

[britfish]

What is your monthly payment? Multiply that times the number of payments left. Now compare the two...your savings is the difference between the two (interest).

Great tip, I understand it now! And woohoo for the savings, I love it! I am so excited to pay it off early now!

 

[ChisJo]

We too are working at paying our car off early. I did this with my last car and figured I saved easily about $800 in interest.

If we pay this one off early, we will save I figure about $500. Savings is savings. I try to put an extra payment a month.

 

[My2BabiesLexis&Dill]

Just a reminder if you do call the bank on Monday, they may be closed.

 

[seashoreCM]

The method of figuring how much interest you pay varies if you pay off early.

In one system the time fromthe start of the loan to the final payment determines the interest regardless of whether some of the larger payments were in the middle or near the beginning.

In some systems there is a surcharge for paying off early.

The exact rules are in your loan documents.