For context, I have an auto loan I have been paying $300 every 2 weeks for the past year. Auto loan is $565/mo and 6.69% interest. I called to see if my extra payments have been going to principal or interest and they said it’s been going to payoff the next month – so in a way, both interest and principal.
My question is should I set up monthly auto pay to $600/mo and set up for the extra $35 to go into principal debt? Or should I continue making these biweekly payments, which in doing so gives me 13 payments/yr? What does the calculation look like on this?
Biweekly payments or $35 monthly towards principal?
byu/spalacio88 inpersonalfinance
Posted by spalacio88
3 Comments
It sounds like they are just using the $35 to advance your payment due date. What does your statement say your next payment is due and the amount? If it is just counting towards your next payment, this does not pay down the principal. It just gives the bank an interest free loan on your money until you decide to skip a payment. Switch to just paying monthly.
It’s not going to really make any difference. This gives you an idea of how your loan works:
https://www.peopledrivencu.org/wp-content/uploads/2020/06/PDCU-daily-simple-interest.pdf
Does your auto loan’s payment portal/website/app give you the option to pay down the principal rather than just an advance on your next months’ payment, or is it less sophisticated?