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springchick
make a wish
Member since 5/08 3566 total posts
Name:
justask
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Question about car payments and interest rate
Ok so I am a little confused on how this work. I am checking the payments I had made and how much went to interest and how much to the principal. Every payment is different. I always pay before it's due but days change according to when I get pay. The difference is as much as $25 toward interest. Why is that? I am just curious if anything I can do to make sure more goes toward principal.
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Posted 10/28/16 1:03 PM  |
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Pomegranate5
LIF Adult
Member since 2/11 4798 total posts
Name:
Pomegranate5
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Re: Question about car payments and interest rate
Unless I'm misunderstanding the question, there isn't anything you can do to change how much of a specific monthly payment goes toward principal. Every month that goes by, the amount that goes toward interest should decrease and the amount that goes toward principal will be increased. But anything you pay over and above the set monthly payment should go directly to principal.
Message edited 10/28/2016 1:50:01 PM.
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| Posted 10/28/16 1:48 PM |
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GoldenRod
10 years on LIF!
Member since 11/06 26792 total posts
Name:
Shawn
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Re: Question about car payments and interest rate
Overly simplified, and the numbers aren't accurate:
Original loan: $20,000
Monthly payment: $500
Month 1: Interest on $20,000 = $50, Principle = $450
Month 2: Interest on $19,550 = $49, Principle = $451
Month 3: Interest on $19,099 = $48, Principle = $452
etc.
Look up "Amortization Schedule" in Google to get a better idea of this..
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| Posted 10/28/16 2:46 PM |
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jaykaylol
LIF Infant
Member since 6/16 170 total posts
Name:
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Question about car payments and interest rate
what i've noticed, if you have a monthly payment schedule - some months with 30 vs 31, you have an extra days worth of interest. if you pay different days each month and you pay it on the 12th one month but the 18th the next, you will see a discrepant amount
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| Posted 10/28/16 2:52 PM |
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Shroggie
Don't Worry...Be Happy
Member since 5/06 6261 total posts
Name:
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Re: Question about car payments and interest rate
The difference you are seeing is because you are paying on different days of the month. Your interest will be calculated on your principal balance and the amount of days since your last payment.
If you always pay on the same day, your interest will always go down (given the same amount of days are in each month). So on the months with 31 days there will be a day more interest than the months with 30.
Auto loans are simple interest loans, not amortized, so the interest is daily.
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| Posted 10/28/16 5:34 PM |
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GoldenRod
10 years on LIF!
Member since 11/06 26792 total posts
Name:
Shawn
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Re: Question about car payments and interest rate
Posted by Shroggie
The difference you are seeing is because you are paying on different days of the month. Your interest will be calculated on your principal balance and the amount of days since your last payment.
If you always pay on the same day, your interest will always go down (given the same amount of days are in each month). So on the months with 31 days there will be a day more interest than the months with 30.
Auto loans are simple interest loans, not amortized, so the interest is daily.
Auto loans are simple interest loans, and amortized. Different concepts.
Simple interest means that only the principle gets charged interest. The interest doesn't gain interest. That's compound interest.
Amortized loans mean that the interest is charged based on the amount of the principle remaining, so it does change every month.
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| Posted 10/28/16 6:44 PM |
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Shroggie
Don't Worry...Be Happy
Member since 5/06 6261 total posts
Name:
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Re: Question about car payments and interest rate
Posted by GoldenRod
Posted by Shroggie
The difference you are seeing is because you are paying on different days of the month. Your interest will be calculated on your principal balance and the amount of days since your last payment.
If you always pay on the same day, your interest will always go down (given the same amount of days are in each month). So on the months with 31 days there will be a day more interest than the months with 30.
Auto loans are simple interest loans, not amortized, so the interest is daily.
Auto loans are simple interest loans, and amortized. Different concepts.
Simple interest means that only the principle gets charged interest. The interest doesn't gain interest. That's compound interest.
Amortized loans mean that the interest is charged based on the amount of the principle remaining, so it does change every month.
Yup! I meant compound, not amortized. My brain is not functioning while playing referee to my 2 toddlers.
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| Posted 10/28/16 9:24 PM |
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springchick
make a wish
Member since 5/08 3566 total posts
Name:
justask
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Question about car payments and interest rate
Got I think what was throwing me off was that I pay different day through out the month
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| Posted 10/28/16 10:16 PM |
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GoldenRod
10 years on LIF!
Member since 11/06 26792 total posts
Name:
Shawn
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Re: Question about car payments and interest rate
Posted by Shroggie
Posted by GoldenRod
Posted by Shroggie
The difference you are seeing is because you are paying on different days of the month. Your interest will be calculated on your principal balance and the amount of days since your last payment.
If you always pay on the same day, your interest will always go down (given the same amount of days are in each month). So on the months with 31 days there will be a day more interest than the months with 30.
Auto loans are simple interest loans, not amortized, so the interest is daily.
Auto loans are simple interest loans, and amortized. Different concepts.
Simple interest means that only the principle gets charged interest. The interest doesn't gain interest. That's compound interest.
Amortized loans mean that the interest is charged based on the amount of the principle remaining, so it does change every month.
Yup! I meant compound, not amortized. My brain is not functioning while playing referee to my 2 toddlers.
Two toddlers... yeah, you definitely get a pass on any sort of brain activity... 
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| Posted 10/29/16 1:09 AM |
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