Battle of the Truck Note
December 2nd, 2007 by Ana
Friday I spent some time doing battle about the truck note (auto loan for non-Southerners) but not with hubby: Hubby is now completely sold on the idea of paying that note off. No, I was battling with hubby’s credit union, the noteholders.
We’ve been paying extra, AKA the “debt snowball” method, and for some strange reason they have been applying the extra as advance payments. The main problem with this is the note is drawn up to not be allowed to be more than 90 days ahead of schedule, so twice now they have moved our due date “so proper amounts of principle and interest can be applied to the loan,” according to the letters they sent. My interpretation: “We don’t like you paying extra because that reduces the amount of interest we can make off of you.” I would expect this kind of behavior from a bank, not a credit union!
So I got onto their web-based live chat help on Friday trying to find out how to get our extra payments applied towards principle instead of being counted as paying ahead. The first customer service rep had me really going: she kept contradicting herself, and after about 45 minutes I finally got transferred to another rep who made sense and didn’t sound like she was just repeating things in a script. Meanwhile I was talking to hubby on the phone to let him know what was going on.
The short version of the answer is we need to mark extra payments as “for principle only” because their computer system doesn’t have the sense programmed into it to recognize that extra payments should automatically go towards principle instead of being applied towards the next payment. She was also kind enough to send a note to the payment processing department so they notated the current extra payment as “for principle only.” I am happy to report it actually happened that way!
I guess the moral of this little chat and phone-based adventure is that they are just not used to handling someone who wants to pay a note down as quick as possible. My theory is they are used to people paying LATE or letting the truck note go on and on and on forever - or at least for all 60 months as it was originally drawn up. So our case has pointed out a little glitch in their program: how it really handles extra payments versus how it *should* handle extra payments. I can guarantee y’all I will take great pains to include in all capital letters in the memo field of my checks “FOR PRINCIPLE ONLY” from now on!
Those of y’all who are making extra payments on vehicle notes should probably take a close look at just how those extra payments are being broken down: Are they going 100% towards principle, or is their computer program advancing your due date and still charging interest?
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December 2nd, 2007 at 2:26 pm
Your credit union may have been doing it accidentally due to a computer issue, but my student loan company does it very much on purpose. And they make it a huge pain to pay towards principal vs advancing due date.
Soon I will start paying the student loan in earnest and I am so not looking forward to the headache it will cause.
December 2nd, 2007 at 6:18 pm
What a PAIN! It is very much less profitable for them, which is why they do it. In fact, some credit card companies will limit the amount of times you can pay toward your debt in a month. Most people only pay once anyway, but they make it a point to make it difficult.
December 2nd, 2007 at 9:44 pm
I discovered I had a similar situation on Friday! We pay all our bills through our bank, and I was sending huge amounts to our car loan. There was a comment area in the same area where I entered the check amounts, so I always wrote APPLY TO PRINCIPAL. Come to find out, this comment was never being sent to the place where my car loan was! So all of those payments were considered “early” payments instead of bringing down the principal. Frustrating! My next payment isn’t officially due until next May now, due to this fiasco.
December 2nd, 2007 at 10:56 pm
green3, I do feel your pain…and I would be all over some supervisor or manager if I was in your shoes.
Patrick…this is a credit union; they aren’t supposed to be out for profit! As I said, I would expect this kind of behavior from a bank, and not a credit union.
PaidTwice: any way to get all over your student loan holder about this?
And as a final note: GO STEELERS!!!!!!!!! (I just got done watching the game LOL)
December 3rd, 2007 at 11:32 am
I actually have noticed the same thing on my student loan bills. If you pay more than the amount due, you have to check off a specific box — if not, your next payment is moved up.
December 3rd, 2007 at 12:52 pm
What a pain is right! I would expect that from a bank but not a credit union.
I was told by my bank that any extra payments would just move the due date or my next payment back. I am ashamed to admit it, but I believed them. Now I will have to call and ask someone else. I need to dig out that contract, too.
December 5th, 2007 at 9:26 pm
I’m just checking — everytime I’ve tried to comment anywhere, I get comment spam instead.
December 6th, 2007 at 7:00 pm
I just dealt with something similar. We have just recently started paying extra on one of the car loans. I called the credit union and asked if there was anything special I needed to do when I transferred the extra money. Thankfully I won’t and it will help reduce the amount of interest we are paying a month. Hopefully it stays like this-I don’t like having to deal with customer service people who don’t know what they are talking about.
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April 20th, 2008 at 4:29 pm
You can at least appreciate their honesty…I never thought a credit union would send such a note. They are right, they will lose some money of the interest they’re charging and that’s why you chose the type of back-payment.