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Teach me about interest rates and payments

Discussion in '3rd Gen. Tacomas (2016+)' started by PoppinCorks, Sep 12, 2017.

  1. Sep 12, 2017 at 5:29 PM
    #1
    PoppinCorks

    PoppinCorks [OP] Well-Known Member

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    Just looked at a statement and im feeling that the amount of interest i pay each month is a little high compared to other vehicles ive owned.

    Ammount owed: 23,865.32
    Interest rate: 3.69
    Monthly payment total: 380.09
    Interest per month: 85.48
    72months
     
  2. Sep 12, 2017 at 5:32 PM
    #2
    TacoCat

    TacoCat These pretzels are making me thirsty

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    When you first get your loan, you will pay more in interest up front. As the loan matures, you pay more toward principle. That way if you pay your loan off early the bank has more chance to get their money out of you. So if you can pay extra each month, that will pay down the principle faster.
     
  3. Sep 12, 2017 at 5:34 PM
    #3
    TacoCat

    TacoCat These pretzels are making me thirsty

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    Even rounding up to $400/month will gain you an extra ~240/yr going toward principle
     
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  4. Sep 12, 2017 at 5:34 PM
    #4
    shakerhood

    shakerhood Well-Known Member

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    Pay extra each month, I usually take my loan for 5 years but pay it off in under 3 years.
     
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  5. Sep 12, 2017 at 5:35 PM
    #5
    josh80

    josh80 Active Member

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    ^^^ What he said, just double check and make sure with your bank the extra you pay is a principal payment. I had to figure that one out with Wells Fargo many moons ago.
     
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  6. Sep 12, 2017 at 5:36 PM
    #6
    jsr813

    jsr813 Active Member

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    Well, it's not so much that you pay less interest because the loan matures. Better to say you pay less interest because you owe less at that time. Right now, you owe a lot, so you pay a lot of interest. Because your payment stays the same, as the principle goes down, the amount of interest you pay that month goes down, and your principle payment increases.
     
  7. Sep 12, 2017 at 5:37 PM
    #7
    TacoCat

    TacoCat These pretzels are making me thirsty

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    Also your interest rate isnt great, but it isnt horrible either. If you have good credit and access to a credit union, check on refinancing with them. Sometimes you can get rates in the 1% range depending on specials, of course YMMV
     
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  8. Sep 12, 2017 at 5:42 PM
    #8
    Joe23

    Joe23 Technically, alcohol is a solution

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    I should check this out with my TD Auto loan for mine.
    it was better rate than toyota auto but not sure if thats how this one works


    I know with my VW it was anything you paid extra was principal which is how I paid mine off in 3.5 years instead of the 5.5
     
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  9. Sep 12, 2017 at 5:43 PM
    #9
    Arcticelf

    Arcticelf Well-Known Member

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    Look up something called an amortization schedule. It shows you how each payment is divided between interest and principle. The math behind the compounding interest isn't hard, if you want to calculate it out.

    The thing to remember is that paying off the loan early can rase your effective interest rate (interest payed as a % of money borrowed over the now shorter period of loan), because the first payment is mostly interest, and the last mostly principal. However if it's the last loan you have, being debt free is very nice.
     
  10. Sep 12, 2017 at 5:46 PM
    #10
    PoppinCorks

    PoppinCorks [OP] Well-Known Member

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    for what its worth credit karma has me at 745 credit score.

    I was thinking i should pay around 3 grand over 7 years for interest. does that sound about right?
     
  11. Sep 12, 2017 at 6:57 PM
    #11
    Shady Rascal

    Shady Rascal New Member

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    Your loan is for 72 months, which is six years, not seven.
     
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  12. Sep 12, 2017 at 7:13 PM
    #12
    jerzsubbie

    jerzsubbie Member

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    I like to use BankRate.com's calculators. I'm a finance guy (not auto finance, but corp finance) and still find these very useful because they make it super easy for anyone to digest.

    Once you enter your info, look at the amortization schedule. That will answer most of your questions.

    http://www.bankrate.com/calculators...spending_global-nav_auto_auto-loan-calculator

    Based on the info you've shared and using BankRate's calculator here is your picture:
    Amount borrowed: $25,000
    Interest Rate: 3.69%
    Term: 72mo/6yr
    Monthly payment: $380
    Total Interest paid over life of loan: $2,349

    To exaggerate the impact of relatively low interest rates on large amounts over a long period of time, take a home mortgage as an example. On average, if you take out a $250k mortgage at 4.5% for 30yr, you end up paying $456k after interest. You're paying nearly the price of the home in interest over 30yr! This is why it's great to take out a 30 to give yourself flexibility but pay it off as a 15 or 20yr which is only a ~30% extra payment per month.
     
  13. Sep 12, 2017 at 7:41 PM
    #13
    TeecoTaco

    TeecoTaco Well-Known Member

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    Dood, I'm not financial analyst...but here's my take

    Life is like a shit sammich, the more bread ya got the less shit ya gotta eat.

    Borrow less, own more.
     
  14. Sep 12, 2017 at 8:07 PM
    #14
    JS760

    JS760 Well-Known Member

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    745 and a 3.7% loan over 6 years seems like robbery to me.
    Sounds like you might have fallen for the "how much can you afford" trick, and they backed the rate into the Payment you wanted
     
    Last edited: Sep 12, 2017
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  15. Sep 12, 2017 at 8:20 PM
    #15
    rtzx9r

    rtzx9r Well-Known Member

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    Still, 3.7% is low. Ask your folks about paying 16% mortgage rates 40 years ago.
     
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  16. Sep 12, 2017 at 8:22 PM
    #16
    Qwack

    Qwack Well-Known Member

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    if at all possible pay an extra $100 a month to pay the loan off sooner and save some extra cash.
    when the payment is over then continue making that payment into your savings account and soon
    you will have enough cash to make your next vehicle purchase without taking out a loan.
     
  17. Sep 12, 2017 at 8:27 PM
    #17
    theredofshaw

    theredofshaw Well-Known Member

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    Definitely make sure the bank has it set up towards principle. Had to fight US Bank for a couple months to get them to apply my extra to the mortgage principle despite marking that block on the web payment page.
     
  18. Sep 12, 2017 at 9:27 PM
    #18
    synaps3

    synaps3 Wag more bark less

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    This varies by state. Here in GA at least, Toyota's financing has an amortization schedule consistent across the life of the loan. So, instead of paying more interest up front, it is the same interest / principle each month. This is very advantageous if you are thinking of paying off loans early, since you will have put more towards principle when you go to pay.

    As others have said, you were fleeced for your rate. That's an awful rate for your score. I'd go to a credit union and refinance.
     
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  19. Sep 12, 2017 at 11:41 PM
    #19
    Jeffro250

    Jeffro250 Well-Known Member

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    Hardly. Unless you have absolutely pristine credit, anything under 4% for a 72 month loan is doing quite well...
     
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  20. Sep 12, 2017 at 11:50 PM
    #20
    TacoTronics

    TacoTronics War Eagle!

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    I believe it's a high interest rate solely based on the length of the loan. I am sure you would've gotten 2ish % if it was 48 months
     
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