Prepayment

Civic_DC2 · 08-03-2006, 04:13 PM

Anyone know how prepayment work?? I deceided to start paying additional $100 on so that the car will get paid sooner and i will pay less interest. My monthly payment is 350, and i paid 450, but then my next payment says 250, is that right? I thought that they would just take the 100 off the original balance and keep billing me the same amount. This looks like they are taking the interest off my extra 100 which would be a rip. Anyone know how this works.

Thanks.

**CameronJr9** · 08-03-2006, 04:16 PM

You MUST call them and get the address to send the additional payment. It's not the same as your scheduled monthly payments. And yes, the interest (not the principle) is being taken. And yes, it's a rip!

SiC17 · 08-03-2006, 04:18 PM

Your monthly payment should remain the same regardless of how much more you paid over the previous month. The only payment that will change will be your final payment. Becareful, though, as some loans have an early-payoff penalty. If you pay off your loan before it's full term expires, you may have to pay a fee. Just look into it before you start over paying on a consistent basis.

**CameronJr9** · 08-03-2006, 04:21 PM

Quote:

Originally Posted by SiC17

Your monthly payment should remain the same regardless of how much more you paid over the previous month. The only payment that will change will be your final payment. Becareful, though, as some loans have an early-payoff penalty. If you pay off your loan before it's full term expires, you may have to pay a fee. Just look into it before you start over paying on a consistent basis.

SiC17, not so. What he's saying happens. Honda's finance department is set up like that. My student loan payments are like that as well. I always overpay. They still send me a bill monthly and I pay it, but my due date isn't for another 6 years, simply because I've overpaid. They do that because if I wait for 6 years to make another payment (it won't be late), then they get all the interest.

DC2, I assume this is through AHFC? If so, there is no overpayment penalty. They simply rip you off if you try to send them anything over the monthly payment. This is why you need to call them and get the address to send any overpayment.

SiC17 · 08-03-2006, 04:21 PM

I did this with my previous car and the amount overpaid was taken off the priciple amount. I guess it depends on your loaner.

SiC17 · 08-03-2006, 04:23 PM

Quote:

Originally Posted by CameronJr9

SiC17, not so. What he's saying happens. Honda's finance department is set up like that. My student loan payments are like that as well. I always overpay. They still send me a bill monthly and I pay it, but my due date isn't for another 6 years, simply because I've overpaid. They do that because if I wait for 6 years to make another payment (it won't be late), then they get all the interest.

DC2, I assume this is through AHFC? If so, there is no overpayment penalty. They simply rip you off if you try to send them anything over the monthly payment. This is why you need to call them and get the address to send any overpayment.

Ah, I've always had my car loans through my credit union. Honestly, I'm not too familiar with many other loans. Sorry!

**CameronJr9** · 08-03-2006, 04:24 PM

Quote:

Originally Posted by SiC17

I did this with my previous car and the amount overpaid was taken off the priciple amount. I guess it depends on your loaner.

I think that's how it should be! My house payments are like that. Any extra I pay is taken off the principle with no early payoff penalties. Instead, Honda's financing wants you to send another check, in another envelope, using another stamp in order to pay off your car early. It's kind of a shady deal if you ask me.

Si 4 Life · 08-03-2006, 05:11 PM

Okay, I work in the finanace industry. You have to comply with the contract you signed. The contract will specifically state whether you will be charged extra for prepayment (it depends if the finance company decides to inforce this or not).

If you have a simple interest loan: extra principle will reduce the overall loan amount. You still pay interest, but you save from paying more interest by paying the extra amount. If you have already met the monthly payment amount, the finance company is required by law to apply this to principle (no matter what).

Precomputed loan: you are required to make all payments and must include all interest. You can pay it off early by making more payments, but you do not really save hardly any money.

I agree with one of the other posting though, find out how the finance company wants you to do the extra payment. Otherwise, they may still apply it incorrect. Get a payment history to verify what they are doing and how they have applied your payments.

Civic_DC2 · 08-03-2006, 05:41 PM

Great i think i just lost some money, damn those bastard, cant they just do it the right way that will help out the customers the most, i swear, i hate american honda. I guess i will have to call and see where to send additional payments, thanks guys, once again, you have been a great help.

**Silver8th** · 08-03-2006, 05:55 PM

I pay $20 extra/month and the credit union automaticaly deducts the extra I pay from the principal balance.

***Cybergypsy*** · 08-03-2006, 05:58 PM

I just called honda finance, Cameron is correct if you want to pay principle you need to send it to another address...and write principle onthe check, i also am thing of doing this, the address for me is in TX.

***Janizary*** · 08-03-2006, 07:51 PM

Quote:

Originally Posted by Cybergypsy

I just called honda finance, Cameron is correct if you want to pay principle you need to send it to another address...and write principle onthe check, i also am thing of doing this, the address for me is in TX.

+1

It states in you contract how 'overpayments' are applied. In the case of an AHF loan, overpayments are credited towards the next month's payment, NOT the balance of the loan. You MUST send pricipal payments to a different address, with specific instructions on how to apply the remittance.

**Tim** · 08-03-2006, 08:45 PM

You guys are still using checks? Welcome to the 21st century! hondafinancialservices.com. Provided that you financed with American Honda finance, you can make payments online. Extra payments go towards the principal, etc.

**Tim** · 08-03-2006, 08:47 PM

Plus, then you can make weekly payments or payments every other week much easier. Using that method, you'll pay off your loan quicker.

***Cybergypsy*** · 08-03-2006, 08:59 PM

Quote:

Originally Posted by Tim

You guys are still using checks? Welcome to the 21st century! hondafinancialservices.com. Provided that you financed with American Honda finance, you can make payments online. Extra payments go towards the principal, etc.

No they dont I pay online however it goes towards intrest, not principle...I just called.
So you are paying money towards your intrest....you should really call....

6ft5inAllMan · 08-03-2006, 10:04 PM

Read the back of the AHFC bill with the payment coupon on it

"Principal Payment (Loans Only) Payemts in excess of the amount due will reduce principal and show as a credit to your next month's payment. Continuing to make payments or making payments in excess of the amount due will have the effect of reducing your final payment or shortening the term of your loan."

Hope this solves your problems....

***Cybergypsy*** · 08-03-2006, 10:14 PM

Quote:

Originally Posted by 6ft5inAllMan

Read the back of the AHFC bill with the payment coupon on it

"Principal Payment (Loans Only) Payemts in excess of the amount due will reduce principal and show as a credit to your next month's payment. Continuing to make payments or making payments in excess of the amount due will have the effect of reducing your final payment or shortening the term of your loan."

Hope this solves your problems....

yes but you have ti send it to another addy, I just called...can not be done online

**Tim** · 08-03-2006, 10:17 PM

This is my second car financed through American Honda Finance Corp. With both vehicles, I made early payments toward the principal online. Yes, you do pay interest charges, but that's according to how frequently finance charges are accrued.

Civic_DC2 · 08-03-2006, 11:51 PM

I pay online and it is a freaking rip if they take my money and use it to pay off some of the interest. I could have taken the extra cash and put it somewhere else and get interest instead of letting those A$$whole keep it interest free. Granted ill probably make .02 cents, but it is the principal of the matter. They would not let me borrow their money interest free, why the hell should i let them hold my money interest free. Thanks everyone for the help, i will call American Honda and get the address and start doing in it right.

Thanks again.

Si 4 Life · 08-04-2006, 10:18 AM

On a simple interest deal, interest is accumulated daily. That is why this extra amount you are paying still pays a little to interest. Still keep paying early. Eventhough you are paying a little interest, you are still paying on principal too. Paying an extra $100 will probably take off 5-6 payments from the end of your loan.

08-03-2006, 04:13 PM	#1 (permalink)
Civic_DC2 Senior Member Join Date: Mar 2006 Posts: 200 iTrader: 0 / 0%	Prepayment Anyone know how prepayment work?? I deceided to start paying additional $100 on so that the car will get paid sooner and i will pay less interest. My monthly payment is 350, and i paid 450, but then my next payment says 250, is that right? I thought that they would just take the 100 off the original balance and keep billing me the same amount. This looks like they are taking the interest off my extra 100 which would be a rip. Anyone know how this works. Thanks.

08-03-2006, 04:16 PM	#2 (permalink)
CameronJr9 Join Date: Feb 2006 Location: Louisville, KY Age: 28 Posts: 26,334 Back and Forth Forever iTrader: 6 / 100%	You MUST call them and get the address to send the additional payment. It's not the same as your scheduled monthly payments. And yes, the interest (not the principle) is being taken. And yes, it's a rip! __________________

08-03-2006, 05:55 PM	#10 (permalink)
Silver8th Join Date: Sep 2005 Location: GA Posts: 6,816 EARL iTrader: 4 / 100%	I pay $20 extra/month and the credit union automaticaly deducts the extra I pay from the principal balance. __________________

08-03-2006, 05:58 PM	#11 (permalink)
*Cybergypsy* Resident Caraholic Join Date: Apr 2006 Age: 48 Posts: 8,099 iTrader: 3 / 100%	I just called honda finance, Cameron is correct if you want to pay principle you need to send it to another address...and write principle onthe check, i also am thing of doing this, the address for me is in TX. __________________ I would rather be judged by 12, than carried by six!

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08-03-2006, 04:18 PM	#3 (permalink)
SiC17 Senior Member Join Date: Jun 2006 Location: Austin, Texas Age: 30 Posts: 552 Chris iTrader: 0 / 0%	Your monthly payment should remain the same regardless of how much more you paid over the previous month. The only payment that will change will be your final payment. Becareful, though, as some loans have an early-payoff penalty. If you pay off your loan before it's full term expires, you may have to pay a fee. Just look into it before you start over paying on a consistent basis.

08-03-2006, 04:21 PM	#5 (permalink)
SiC17 Senior Member Join Date: Jun 2006 Location: Austin, Texas Age: 30 Posts: 552 Chris iTrader: 0 / 0%	I did this with my previous car and the amount overpaid was taken off the priciple amount. I guess it depends on your loaner.

08-03-2006, 05:11 PM	#8 (permalink)
Si 4 Life Senior Member Join Date: Aug 2006 Location: Arlington TX Age: 29 Posts: 259 James iTrader: 0 / 0%	Okay, I work in the finanace industry. You have to comply with the contract you signed. The contract will specifically state whether you will be charged extra for prepayment (it depends if the finance company decides to inforce this or not). If you have a simple interest loan: extra principle will reduce the overall loan amount. You still pay interest, but you save from paying more interest by paying the extra amount. If you have already met the monthly payment amount, the finance company is required by law to apply this to principle (no matter what). Precomputed loan: you are required to make all payments and must include all interest. You can pay it off early by making more payments, but you do not really save hardly any money. I agree with one of the other posting though, find out how the finance company wants you to do the extra payment. Otherwise, they may still apply it incorrect. Get a payment history to verify what they are doing and how they have applied your payments.

08-03-2006, 05:41 PM	#9 (permalink)
Civic_DC2 Senior Member Join Date: Mar 2006 Posts: 200 iTrader: 0 / 0%	Great i think i just lost some money, damn those bastard, cant they just do it the right way that will help out the customers the most, i swear, i hate american honda. I guess i will have to call and see where to send additional payments, thanks guys, once again, you have been a great help.

08-03-2006, 08:45 PM	#13 (permalink)
Tim Super Moderator Join Date: Mar 2006 Age: 29 Posts: 5,300 iTrader: 10 / 100%	You guys are still using checks? Welcome to the 21st century! hondafinancialservices.com. Provided that you financed with American Honda finance, you can make payments online. Extra payments go towards the principal, etc.

08-03-2006, 08:47 PM	#14 (permalink)
Tim Super Moderator Join Date: Mar 2006 Age: 29 Posts: 5,300 iTrader: 10 / 100%	Plus, then you can make weekly payments or payments every other week much easier. Using that method, you'll pay off your loan quicker.

08-03-2006, 10:04 PM	#16 (permalink)
6ft5inAllMan Senior Member Join Date: Oct 2005 Age: 28 Posts: 249 iTrader: 0 / 0%	Read the back of the AHFC bill with the payment coupon on it "Principal Payment (Loans Only) Payemts in excess of the amount due will reduce principal and show as a credit to your next month's payment. Continuing to make payments or making payments in excess of the amount due will have the effect of reducing your final payment or shortening the term of your loan." Hope this solves your problems....

08-03-2006, 10:17 PM	#18 (permalink)
Tim Super Moderator Join Date: Mar 2006 Age: 29 Posts: 5,300 iTrader: 10 / 100%	This is my second car financed through American Honda Finance Corp. With both vehicles, I made early payments toward the principal online. Yes, you do pay interest charges, but that's according to how frequently finance charges are accrued.

08-03-2006, 11:51 PM	#19 (permalink)
Civic_DC2 Senior Member Join Date: Mar 2006 Posts: 200 iTrader: 0 / 0%	I pay online and it is a freaking rip if they take my money and use it to pay off some of the interest. I could have taken the extra cash and put it somewhere else and get interest instead of letting those A$$whole keep it interest free. Granted ill probably make .02 cents, but it is the principal of the matter. They would not let me borrow their money interest free, why the hell should i let them hold my money interest free. Thanks everyone for the help, i will call American Honda and get the address and start doing in it right. Thanks again.

08-04-2006, 10:18 AM	#20 (permalink)
Si 4 Life Senior Member Join Date: Aug 2006 Location: Arlington TX Age: 29 Posts: 259 James iTrader: 0 / 0%	On a simple interest deal, interest is accumulated daily. That is why this extra amount you are paying still pays a little to interest. Still keep paying early. Eventhough you are paying a little interest, you are still paying on principal too. Paying an extra $100 will probably take off 5-6 payments from the end of your loan.