Toyota Financial Tricky Payment?

There is no way to specify you want extra money to go towards principle online. It just goes towards your next payment/s.

 

It's how interest is calculated in your contract, not how it's paid. Check your contract for the words "Simple Interest" which means you pay interest on the amount left x months.

Your contract will also total up the amount of interest you are paying over the term of your loan...in my low-interest case it's less than $10 per month going to interest.

Note how they say "outstanding balance is not your payoff amount" on your monthly bill? You need to call them if you want to see the effect of prepaying.

 

U pay interest according to apr. Aka if u pay it off faster you pay less interest. It doesn't matter if u pay it toward principle or off the next payment because at any rate you'll pay it off faster. If ur payments are say three years ahead you won't be paying any interest on those last three years.
Loans use what's called "simple interest"

 

Yes.

FYI - This also applies to mortgages as well

It makes sense on their end because automatically applying it to the principle typically reduces the amount of interest they end up making, so applying it as payments ensures they will get their interest.

Depending on the type of loan, adding a little specifically to be deducted from the principle usually reduces the total amount of interest paid over the life of the loan (especially with a mortgage).

Even sending a payment every two weeks instead of every month will greatly reduce the amount of interest paid on a 30 year mortgage.

Most of the time it really doesn't affect a car loan much though.

I hope this helps

~Mark

 

Each month interest is calculated on the outstanding principal balance. An ammortization schedule shows what you're paying for interest and principal if the payment is made on the due date each month. If you make your payment earlier than the due date the principal is reduced earlier in the period and the interest accruing is based on the lower balance earlier in the period thus reducing the overall interest paid over the term. Now while Toyota's practice of applying the extra to next months payment probably benefits them because they are applying the monies to interest first, over time the extra over the interest due gets applied to the principal lowering that amount sooner and accruing less interest over the term. That's how I see it. I could be wrong though.

 

Yup..... that's the way most of them are now-a-days.

My husband had to send two separate checks to his bank on his Acura to make payments on the principle.

If you don't do that....they just keep taking it off every month. They're sneaky like that because they're reaping more interest off you by doing it that way and praying on the consumer who otherwise doesn't know they need to write two checks.

Be glad you made that phone call. Some people never realize they should've made that phone call. The bank isn't gonna offer you that information either.

 

My problem with TF is that they act apart from dealership Finance managers. It's almost like the one hand doesn't know what the other is doing. I moved my loan to my credit union once I realized the dealer finance manager had no clue as to loan provisions. I specifically wanted bi-weekly withdrawals and TF does not offer that.
If possible, join a Credit Union. They treat you better and offer things like bi-weekly payments so you pay down principal faster and the payments are lower. In my case a $490/month payment went $452, simply by making a payment every two weeks @$226. Over a 5 yr. loan that comes out to $2280 in savings. In any case, it helps to pay down loan principal which also helps your credit score.

 

If you continue to make the car payment on time and add another $100 every month at the end of the term it will equal out. Since you are dropping 1 payment for every X months extra paid. By applying it to the next payment the bank is hedging its bets in case you miss a payment or two along the way.

I pay an extra 150 per month on my mortgage. It comes through a separate auto draft and they were told from the first draft it was to be applied to the principal. To date 2 years later, no problems whatsoever.

 

I do the same thing with Toyota Financial. I pay a little extra every check and I pay online. I'm going to call them to see if they can apply the extra money to the principal amount.

 

The two automotive loans I've had with TFS are simple interest loans(my understanding most of them are). Any additional monies received above the payment amt will "usually" go to principal and deduct off the next month's installment.

A simple interest loan calculates the amount interest owed on a daily basis. There are several versions of the denominator calculation but the most common is the 365 day methodology( there are 360 and 366, some recognize leap year, some dont). Therefore, your daily interest is calculated as: (Unpaid principal Balance * interest rate) / 365 days. Your payment is based on the amortization of your loan balance at your interest rate over the term. So lets say your payment is $300 bucks and today is may 1st and you make your 1st installment on june 1st. Your unpaid principal balance over that time is $25,000 and interest rate is 5%. Since there are 31 days in May, the calculated interest is $106.16 dollars ($3.42 dollars a day for 31 days). When the installment on June 1st is made, $106.16 goes to interest and $193.84 goes towards the 25,000 principal balance. Now you if you make a $400 dollar payment, $293.84 goes towards principal AND reduce next month's installment by $100 dollars ($200). You can pay just the $200 because you have paid more than contractually due.

There is definitely food for thought.
1) A simple interest loan is NOT an amortized loan. The payment amount is based on what it would take to amortize the loan, but the interest applied at each payment can differ. An amortized loan has a calculated amount going towards principal and interest each month, hence amortization schedule.

2) your the amount of interest that each payment can differ from month to month and how you make your payments. If you wait 45 days between payments, more of it will go towards interest than principal, but if you make biweekly (1/2)payments you will actually reduce the amount of total interest paid over the life of the loan. Just think about the calculation above.

3). if you are consistently late and you make only the "minimum monthly installment" you could have a balloon(unpaid principal) at the end of the life of the loan. I have personally seen this happen. This happens when the amount of daily interest calculated is greater than the installment itself. This differs from the standard amortizing loan that everyone knows about.

4). If you pay extra each month, your due dates can roll to the next month(s). The example from above, if you pay 400 and your payment is only 300, then by making the 3rd payment, you roll two months instead of one. Usually the statement will reflect the new due date being 45 days out instead of 15 days out. You don't have to pay until the statement date, but what's the point of paying ahead?

Sorry for the long winded response, but in general practice, this is how a DSI (daily simple interest) works and wanted to share the information. However, each institution is different and each person's note/financial responsibilities are different therefore this information may not apply. Please review your contract and contact your financial institution, if you have any questions.

 

YOU NEED to call your bank and tell them to apply the extra payment towards PRINCIPAL.

If they're telling you *You owe at a later date* - they're applying your extra payment towards your next monthly payment. That's not saving you any money at all.

 

You'll have to check with the specifics of your loan and let's hope your loan is a standard one - and not trap you into not allowing you to pay $$ towards principal to save you money.

Take a look at this website: It's a loan calculator.
http://www.bankrate.com/calculators/mortgages/loan-calculator.aspx

You can punch numbers in there and see how things change if the extra money goes towards principal. I plugged in (for the hell of it) a $30,000 loan at 8% for 60 months = $608.29 per month. That's a total of $36,497.51 that you're paying. Of that...the bank is making $6,497.51 in interest.

If you add $100 per month towards principal .... You're only paying the bank $5369.25 in principal and you'll pay off the loan 10 months earlier. Saving yourself $1128.26. Doesn't seem like much...but it's much better than giving that money to the bank.

Banks are sneaky....and they'll take your extra payments and put it towards the next months payment, which doesn't save you anything and doesn't change the way the loan is calculated. It's a sneaky way for them to make sure you continue paying them interest. I really don't know much about all this stuff, but we've had enough banks try to sneak this BS on us....NO WAY in hell!! We make damn sure our extra $$ goes towards principal.

 

Where does everyone think the extra money is going. That if your statement says you don't owe us a payment next month because we applied your overpayment to your payment. You just dropped a months payment. As long as you pay every month that deferred payment is dropped from the back end. Do that 12 times and you drop a year.

You all act like they are just eating the damn money. It is accounted for somewhere, and no it's not just applied to interest and lost.

 

i paid mine biweekly. paid it off faster and caused 13 payments per year.

 

That's the whole point. Making sure the bank is putting your extra payments towards principal.

 

Call your bank. Make sure your extra payments are going towards the principal. PERIOD. If you don't do that, you're only screwing yourself and lining the banks pockets. It's an easy phone call and takes a few minutes.

 

It makes perfect sense. They want to keep the loan on the books, earning interest.

 

I stand corrected.

http://www.myjourneytomillions.com/...auto-loan-was-not-being-applied-to-principal/

I have never had that happen before on a loan. Even a personal loan. I paid double payments and it was paid off in less than half the time. Looks like some of you have fucked up banks. I looked at my loan documents and they state any extra monies will be applied in the following order: late payment/penalties and then principal.

OP. Call Toyota and tell them to get their head out of their asses, you are paying on the principal and not the bankers car payment.

 

i work for a financial institution and our institution you have to send in a separate check with Principal only written on the memo line, you can take it to any bank branch to have it processed you dont have to mail it but a separate check does have to be written if you want something to go towards principal only otherwise like stated above if you write a check that is worth 12 payments, then its going to the next 12 payments not principal only.

 

I was referring from the customer's perspective.