Help with a car loan

[bobby123]

Hi,

I am only 19 years old.....I don't know much about loans.

I have bad credit...it not all my fault mostly my girl friends....

Last week I signed a load for a 22000 car at 17.74% Apr. for 6 years,

I realize that this is a high apr, I really needed a car to get to school and work.... , and It was the only loan that I seemed to be able to get.....So I just did it because I really needed a car...

Anyway I am expecting some inheritance soon. I am planning on paying off the load in full within a few months.....But I just noticed something.

On the contract it says... you may prepay all or part of the amount financed at anytime without penalty... If you do so you must pay the earned and part of the Finance charge and all other amounts due up to the date of your payment...

I saw where it said that I can prepay with out penalty....I figure that I can pay this off in a year with the inheritance that I will be receiving, and the money that I will earn...


but I didn't see were it says..." If you do so you must pay the earned and part of the Finance charge and all other amounts due up to the date of your payment"""


What dose this mean????? Dose this mean that I will only have to pay the apr for that year up until the time I have it paid off????

Of the contract it says Finance Charge $15317....and the amount financed 22735.....Total payments $38052....


Dose this mean that I will have to pay all the $38000?????? Regardless if I pay it off early when I get my inheritance?????? Or will I only have to pay the $22000 plus some interest???

On the top it says Retail Installment sale Contract Simple Finance Charge..

Please help me out here what can I DO????

[lorraineb]

First things first. Take a deep breath and try to relax.

It appears that you won't have to pay the full amount if you prepay, but you will need to pay all accumulated interest up to that point, plus the principle amount.

What is a bit more worrying is why you chose to buy a $22,000 car with the current situation your in, especially at 17%+ interest. It sounds like you really need to put a budget together and think a bit more before you go out and buy things. Just because someone is willing to give you a loan doesn't mean getting that loan is a good idea.

[snafu]

Bobby, as you have learned @ 19 y/o, mess up your credit, regardless the cause, and you get charged totally outrageous rates of interest. The Savers who supplied the $$$ get 0.09% [less than 1%] on their money which was loaned to you @ nearly 18%. Did you understand that your decision to buy a $ 22,000. car would cost you $ 38,052. all in?

People with a good credit rating [FICO score] average 7% for a car loan these days. This is your wake-up call as I'm confident you're smart and able to get control of your money NOW. Don't buy anything on credit without 1st establishing what the total payout will be. Start working to get your FICO score higher by paying more than the minimum amount and not ever, ever missing a Due Date. Pay your bills electronically at least two business days before the due date.

If you list income & what you owe and interest rate, we can make suggestions that might help. Wonderful that you get an inheritance but not smart to have it eaten by interest before you see it!

[disneysteve]

People with a good credit rating [FICO score] average 7% for a car loan these days.

Really? I didn't know it was that high. We bought cars in 2012 and 2013 and paid 2.99% each time on used cars which are typically more costly than new cars.

The big problem here is you bought a car you didn't need and couldn't afford. You say you needed this car for work and school. That doesn't mean you had to borrow 22K at almost 18%. You could have bought a car for $5,000. Even at the same interest rate, the cost of borrowing would have been far lower.

[ua_guy]

It sounds like a regular simple-interest vehicle loan with no prepayment penalty. When the time comes to pay it off (whenever), you receive a payoff quote. This is the bank calculating the interest you owe for the month that you intend to pay off the car. In other words, no, you don't owe anything else once you decide to pay off the car, except interest that accumulates between the period when you tell the bank you want to pay off the car, and when they receive your check.

Example: It's the 2nd week of April, and you decide you want to pay off the car. You call the bank for a payoff quote which includes the outstanding principal amount plus 2 weeks of interest to cover April 15-April 30, and you must pay off the vehicle in full by May 1 else you will owe additional interest (May 1- till whenever you pay off the car). If you pay it before May 1, they will generally send you a check for the interest that remains between when you pay off the car and May 1.

FYI, your interest rate sucks. Refinance your loan immediately. I'm guessing you had the dealer come up with a loan for you and that's why they're gouging you at 17%. Join a credit union and refinance the car. With bad credit you should still get a rate between 7-10%.

Here's more advice: When your inheritance comes, pay off the vehicle, and sell it immediately. Set aside $5k or so for a used vehicle purchase and pay cash for your next vehicle. PUT THE REST IN THE BANK.

[Retired To Win]

...When your inheritance comes, pay off the vehicle, and sell it immediately. Set aside $5k or so for a used vehicle purchase and pay cash for your next vehicle. PUT THE REST IN THE BANK.

AMEN!!!

[ua_guy]

Really? I didn't know it was that high. We bought cars in 2012 and 2013 and paid 2.99% each time on used cars which are typically more costly than new cars.

Good credit is a different category than Excellent credit, that's where the misunderstanding is.

[disneysteve]

Good credit is a different category than Excellent credit, that's where the misunderstanding is.

Gotcha. It really does pay to have a high score.

[bjl584]

You'll only have to pay the interest up to the point that you pay off the loan.

But, you made a big mistake. You said that you really needed a car. That's fine. Most all of us need a car, but did you need a $22K car at 17% interest? Did you explore the option of buying a used car more in your price range? Once you get this inheritance you need to pay off this loan and sell the car as someone suggested.