DownTheAvenue wrote:
Raife wrote:
We just purchased our travel trailer and got a much better rate than that. We shopped around for a couple lenders, got preapproved through our bank and the dealer was able to get a another .25% off. We financed for 144 months to get the interest rate (longer term = lower rate), put a sizable down payment, and will be sending in almost double the scheduled payment amount. We will end up paying the loan off in ~5 years as opposed to 12 years.
Check your contract with the bank regarding early pay offs, and discuss with the bank how to handle extra payments. Without care on your part, those extra payments will be applied to future monthly due payments, and although you pay the loan off early, you will pay all the interest as if you paid for the whole term. Sometimes it is just better to make the minimum monthly payment and save up extra money to make a one time large payment to pay off the loan. You can cost yourself many thousands of dollars if you don't do this right.
It is always good to know the exact terms of the loan is before signing, however MOST Interest loans will be OPEN ENDED term loans and will allow for early payoff with no penalties. This type of loan you should always clearly specify how the extra money is to be applied. Failure to specify most banks will simply apply the money the same as making a normal payment towards P&I.
If you specify the extra money is to be applied to the PRINCIPLE ONLY you will now reduce the principle at a much faster pace than allowing it to be applied to P&I.
The loans which are gotcha loans are the ones that entice you in with ZERO PERCENT rates.. Those almost always are CLOSED ENDED loans and paying off early will not save you anything other than dumping the monthly payments early. The Interest is simply hidden inside the loan and they just split the payments in to monthly payments.
