Gdetrailer wrote:
wanderingbob wrote:
As stated above , making extra payments is wrong , you make a payment and also enclose a check and a note stating you are making a " payment on the principal " also .
While I have mentioned that, I have run into a pretty persistent bunch of folks here that always continually point out that there is no need to specifically state how the extra money is to be applied. They insist it is done automatically (which is not always the case, but you can't argue with them).
I cannot figure out what harm it causes to specifically indicate how it is to be applied and in reality it takes but a second and a slight amount of ink from a pen to mark it as such.
Years ago when banks used payment books they ALWAYS had a line which allowed you to fill in the extra amount and how it was to be applied..
Banks are not mind readers and typically the DEFAULT is to apply any extra funds as a extra P&I payment.
Remember a loan IS a binding legal contract..
Almost all vehicle loans are simple interest. When you pay extra, it is automatically applied to the balance, not future payments, by law. Lenders will often also advance the next payment due date when excess payments are received leaving the borrower with the option to either continue payments on schedule, thus shortening the loan term or skipping a payment in the future. It would be the borrower's responsibility to verify with the lender that a future payment can be skipped when payments in excess of the minimum are made. In practice it is very similar to what happens with credit card payments above the minimum amount.
