Simple question about loan.

kenster · #1 (**permalink**) 06-21-2010, 07:31 PM

Hi,

This is my first loan and I have a question. I took out a loan for a car. I am now on my third payment. When I made my first payment 40$ of the 300$ went to the interest as oppose to the principal, ok. When I made the second payment shown on the third billing cycle. It showed that 70$ went towards interest and the rest towards the principal. Is this right? I thought as you make payments the interest amount gets lower and more goes towards the principal.

Thanks.

-Ken

sapphirecapital · #2 (**permalink**) 06-21-2010, 10:09 PM

was the first a partial month?

kenster · #3 (**permalink**) 06-22-2010, 10:42 PM

Quote:

Originally Posted by sapphirecapital

was the first a partial month?

No. It started the first of April and I made the payment mid month of April.

sapphirecapital · #4 (**permalink**) 06-23-2010, 07:29 PM

do you have a list printout for every month? any discount on the first month, look at the total per year and calculate the interest, may be the total interest is put forward per year which would be wrong but I've seen that in private car loans

DavidBibby · #5 (**permalink**) 06-25-2010, 09:40 PM

Quote:

Originally Posted by kenster

Hi,

This is my first loan and I have a question. I took out a loan for a car. I am now on my third payment. When I made my first payment 40$ of the 300$ went to the interest as oppose to the principal, ok. When I made the second payment shown on the third billing cycle. It showed that 70$ went towards interest and the rest towards the principal. Is this right? I thought as you make payments the interest amount gets lower and more goes towards the principal.

Thanks.

-Ken

Ken,

Is the loan at your bank or is this dealer financing with payment coupons?

If it's from a bank or credit union then the interest is most likely applied when the payment is received (as opposed to being applied ON the 1st of the month)

This means that if you paid on the 5th you'd see more interest charged then if you would have paid on the 1st.. then the interest starts a 0.00 again and starts to accrue the next day.

If this is the case.. they you CAN save some money by making your payments every 28 days and get that 13th payment in one year in.

I would expect the next statement to show the interest charged should be less than $70.

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