RV loans

Banks are not charging you interest in advance if they apply the extra money as future prepaid payments. If you have made future prepaid payments and went to pay off your loan then the future payments would change to principal only. In other words you would pay interest up to and including the payoff day.

Robin1953's post correctly describes exactly how to make principal only loan payments.

The reason it happened is the computer just took the loan and applied it as if it were a payment.

Technically, any loan cannot charge interest in advance. That's why they quickly 'fixed' it. In the real world, a bank could make a lot of money on a lot of loans that are paid in advance. In all cases, it is technically illegal, but if no one says anything, it continues.

I'd believe that banks don't specifically attempt to defraud a customer, but will default in favor of the bank before giving up a penny. But, will charge every cent it can unless a client discovers an error and reports it.

I had a car loan one time on which I made extra payments on the principal. The first time I did it they did consider it as an advance payment. The reason was that I sent it from my bank to them and they transferred it electronically and the loan bank's computer didn't know any better. The bank fixed the problem but all future principal payments had to be made by check and it had to have the "Principal Payment Only" written on the check memo field. That way it was handled manually and no more problems with the payments being considered advance payments. YMMV

rk911 wrote:
that happened to us not on our RV loan but on our home equity loan. a call to the bank corrected the error. before you start yelling about audits and calling the feds try a simple, calm and polite call to the bank. I 'spect in most cases that will result in the error being corrected.

You are right. Ask first. Several years ago that didn't work on another bank issue. We got our audit & it turned up more than the bank bargained for. My DW is a tiger when it comes to money. Soon after bank was sold. DW just sent all her paperwork on to the bank board. Sometime being nice just doesn't help. Then it is time to turn up the heat. This bank is starting to figure it out. Charginging me interest on an extra principle payment is going to get them in a lot of trouble. I thought it was just my bank loan. Nope. several banks have been doing this. This practice is not only illegal but bank fraud. They quickly understood those 2 words when my wife spoke to a supervisor. Keep in mind if you or I did these things we would be in jail.

You must specify to the bank that extra money should be applied as a principal only payment. Otherwise they always have and always will apply the money as normal payment(s) made ahead of schedule. This is the default. Many people will send payments early if traveling or going out of the country. Then they can skip paying while they are away. If the bank applied this money as principal only then these people will be in default. This is not a bad business practice, but actually the way extra loan payments work and have always worked. If you do not specify principal only, then it won't be applied to principal only.

that happened to us not on our RV loan but on our home equity loan. a call to the bank corrected the error. before you start yelling about audits and calling the feds try a simple, calm and polite call to the bank. I 'spect in most cases that will result in the error being corrected.