Toyota Financial Tricky Payment?

So I financed my tacoma planning on sending extra money monthly until I have the total amount to pay it off. The first month I sent extra and they deducted it from the amount I owed on the next bill. I spoke with toyota financil and they said to pay extra towards the principal amount I have to send a separate check only to a PO Box in Cedar Rapids, Iowa. Has anyone else heard of this and done this? If so is it better to send the extra money on the website, to this other address or just pay minimum payment until I have the full payoff amount? I will have the full amount within a year I just want to make sure my money gets dispersed the most beneficial way because the toyota financial statements explain just about nothing. Thanks

 

I pay extra monthly but I do it all online though and it takes it out of my account monthly.

 

I learned this lesson the hard way back in the nineties. I got a large tax return and decided to write a big check to my car loan. A few months later I called the bank because my principal had barely gone down and they said I didn't owe a car payment for 9 more months, because I had sent them enough money to cover those payments. They also told me that if I wanted that money to go to principal, I would have to specifically tell them to do so.

 

Exactly. This is standard practice in most any financial institution. Not saying it makes sense, but that's what they do.

 

so for the money to go towards principal, you have to send a check and specify that you want it to go towards principal? I was wondering the same thing

 

I to go through Toyota financial and I used to and still pay extra sometimes but like you, it just deducts it from the next months payment or takes a couple payments away depending on how much I paid extra. I would also like for it to go towards the principle and not just deduct it out of future payments.

 

X2?

 

I guess it makes sense from their point of view, because if you pay down the principal faster, they make less money in interest. Live and learn I guess. I know better now.

 

Exactly!!!!

 

so really if you just pay a little extra on your bill, your kinda throwing money away? Its not really paying the truck off any faster, its just making your next months bills less, right?

 

Yeah thats the deal I am guessing too.

 

You're not "throwing money away", you're just essentially pre-paying your interest. You will pay the car off faster, but not save much money. You will still pay your contracted amount of interest. What you should do is specifically note on the check that it is to be applied towards principal only. Then, the principal amount that your next month's interest is based off of is lower than anticipated, therefore saving you interest expense, and payin the truck off faster.

 

That's exactly why they do it.

 

i have my loan from bank of america, and i pay extra each month.
took a 60 month term and when i make my last payment, i will have made 39.
do all mine on line as well.
paying extra helps you save alot.
my loan is set up anything i pay over the amount of payment the rest goes to principle.
so i can pay off early, or not make a payment for the next 11 months.
and thats straight from a loan officer at bank of america

 

What, exactly, is your goal?

Remember, when you get a car loan it's for the fixed amount you're borrowing, at a fixed interest rate, for a fixed period of time.

Sending extra money and asking it to be applied to the principal will reduce your monthly payment and, ultimately, the amount you pay in overall interest. Only thing is - auto payments aren't usually set up to be recalculated like that.

Unless the principal was very large, the interest was high, and the term was very long - I wouldn't worry about it. Just keep sending the extra dough. Every extra payment you send carves another month off the term.

Kudos for working to pay it off early. Smart thing to do.

 

You have to read the contract and ask questions

Some loans pay off the interest first and then the principle,
so paying extra will pay it off sooner, but save you no money.

Some charge you interest on the remaining balance of the loan
so paying extra will pay it off sooner and save you money on interest paid.

Most will have you do a seperate transaction to do a principle payment only, if allowed by your contract.
They do this so its inconvient and you just make your monthly payments, and they collect their monthly interest.

 

It depends on the bank you have your loan with. Sometimes you even have a penalty if you pay off the loan early.

I looked over Toyota financing and it seemed to have a bunch of traps to get money out of you. I had a honda loan on a dirt bike that was the same way.

I shopped around and got a bank of america loan, much lower interest rate than toyota even offered, no penalties, extra payments go toward the principal, interest only on the balance, there aren't even late fees on the payments, etc.

The special dealer rates were all bs anyway, because you had to give up the rebate, and doing the math the rebate saved you more money than the special financing.

 

Toyota told me if I wanted money to go towards the principle I had to sent a separate check stating principle payment only with my account number on it made out to:

PO Box 9490
Cedar Rapids, Iowa 52409

the only thing I don't understand is how to figure out if sending this extra money is going to make a differance or are they going to get their interest one way or the other? I pick up my truck from the stealership tomorrow for the TSB and billies so I will post what they say. Thanks for all the replies.

 

Geez guys.thats highway robbery on the banks part...in canada I can pay as much as i want whenever I want over and above my loan and goes directly on the principle..they told me to do so.
Another difference between canada and us banking I guess...imo!

 

Why don't you just pay online?

When I had the honda loan their website had a box to check saying I want this payment to go to the principle...

I doubt you're reducing your interest at all with the type of loan you have untill you completely pay it off. You're paying for the interest amount that was on the loan you signed, but if you pay off early you could save some money. You aren't going to see any savings until it is completely payed off though. Also, sometimes they will collect their interest far before you're paid off, and in that case you'd have to pay off really early to get any savings.
Unless your loan had a penalty for early pay off, which means you simply aren't going to get out of that interest.


"Another difference between canada and us banking I guess...imo! "

It's a bank to bank and loan to loan thing. You can even negotiate these things alot of times but most people don't.