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Discussion Starter · #1 ·
Hello guys,

I have my Taos loan (VW Credit at 4.55% APR) to pay, and I'm looking for ways to save money on interest. In theory I have monthly payments of $415 to make, but I did a $800 payment 02/21 and I am paying $500 twice a month, instead.

I was looking my amortization statement here and it says that VW charged me $0 of interest on my $800 payment, $122 of interest on my $500 payment at 03/08 and $21.72 of interest on my $500 payment at 03/15. Do you guys know why they are charging me extra interest even when I pay the same amount?

My main question is, what is the best strategy to avoid spend money on interest, in the long run? I thought it was by paying extra and more frequently, but they are just taking more on interest... :cry:

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Thank you all,
Vini
 

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2022 Taos SEL 4-Motion
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That's all going to depend on the terms of the loan itself.

As an example; I financed via Wells Fargo, and they were dumb enough to give me a π% APR. Payments with WF apparently are regarded as being for the next due, regardless of timing, so when I attempted the same thing, making a second payment, I ended up a month ahead. Since then, I've adjusted my monthly auto-draw to be the full payment, including overpayment/principal, and that's been applied purely to my loan.

So, If VWF works like Wells; Consolidate your payments, and only make one large one per month.

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This happens with any loan really. Multiple payments over your due amount in the same month confuse their system. They see it as next month’s payment and treat it like that. If they didn’t, and they just applied it to principal, but you actually meant for it to cover your next payment, then they would say you are delinquent. How are they to know?

On a mortgage for example, you are supposed to contact them and sign up for an alternate payment schedule if you want to pay every 2 weeks, or 13 payments a year, etc. They have to approve that and their system must be able to process it.

So on our mortgage we just add extra to our monthly payment rather than sending 2. That way the bank KNOWS what your intentions are. They know that the extra goes to principal.
 

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You can't lessen the amount interest by simply making multiple payments. Each of your monthly payments are composed of the principal amount plus the interest. Say your money payment is $350 with a 4.5APR - your paying $300 to your principal and the $50 is the interest amount. You can refinance your auto loan with lenders who have lower rates(based on your credit worthiness of course) Also most lenders have penalties for prepayment. You need to find out from your specific lender the best way to go about paying off your loan "faster". The interest on your auto loan, like any loan, is how these institutions make money. The best route to take is to contact your lender personally and make sure you communicate that you are paying to the principal and check to make sure they don't have penalties. Corradog60 is correct in that you need to make sure your lender knows your goal of paying additional to the loan principal.

Also depending on how VWF is, cutting a large $ check to send every 2-3 months to be put towards your principal is easier than multiple payments a month at random amount. Again, every lender is different and might have a preferred process for something like this.
 

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Hello guys,

I have my Taos loan (VW Credit at 4.55% APR) to pay, and I'm looking for ways to save money on interest. In theory I have monthly payments of $415 to make, but I did a $800 payment 02/21 and I am paying $500 twice a month, instead.

I was looking my amortization statement here and it says that VW charged me $0 of interest on my $800 payment, $122 of interest on my $500 payment at 03/08 and $21.72 of interest on my $500 payment at 03/15. Do you guys know why they are charging me extra interest even when I pay the same amount?

My main question is, what is the best strategy to avoid spend money on interest, in the long run? I thought it was by paying extra and more frequently, but they are just taking more on interest... :cry:

View attachment 813

Thank you all,
Vini

It took me a minute to figure out your statement. Essentially it is saying you've already paid April, so you're next scheduled payment is in May. That's two months accrued interest which is why the interest number is about double the months that come after.

The first payment in Feb looks like it was paid before your statement dropped so all went to principal. Then this next payment had more then a month of accrued interest.

Basically the way to look at it is interest accrues daily until a payment is made, then when you make a payment you pay off that accrued interest to zero. If you pay early or make multiple payments the interest number will be lower for the recorded payment, than if you paid on the due date.

Not sure what your credit looks like or what your ltv is, but you could probably refinance with a credit union for a better rate. I don't believe VW finance has a prepayment penalty, but always a good idea to review the paperwork.
 

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Discussion Starter · #6 ·
Thank you guys!!

It makes sense for me, now! 👏👏

I also did what you told me, I called VW Credit and they explained what happened... When I payed this extra $500 the system has allocated this amount as a future payment for April. That is why we can't see any charge for April. And that is why the system is charging me so much interest for the May charge, because I will be taking 60 days between payments, not 30 days as planned.

I've created this problem paying twice as "current amount owed". I should have used "principal payment" for my second payment. That way the system would have considered my second $500 the same way as the $800, only for principal and without charging interest.

VW Credit guy flipped this extra $500 payment as a principal payment now, and in a few days I should have notice that a charging for April will show up. Also he instructed me to pay monthly the correct amount and if I want to make extra payments to save interest and short the financing, I should use "principal payment" option.

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Thank you all!!
 
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