bigmouth2008

I am financing my Scion tC. I have a 60 mo. term with 4.6%.

I have been paying minimum/scheduled payment for over a year now. My question is, if i start to pay extra or even double payments each month, will I be able to save on interests if I pay it off like 1-2 years ahead of schedule?

I remembered Scion sales told me that no matter how fast I pay it off, there's no panelty, but the total pay off wouldn't change anyhow (i still pay the same amount of interests). Is this true?

Also, if I pay off faster, will that be equally helpful to my credit score?

Thank you guys who take time to answer my questions.

bbruce0

No you will not be able to save on interest if you pay it off early, although you wont have to worry about it once you pay it off and will be worth a lot more to you, if you were to trade it in or such. You would have to pay all of the interest because when you financed, you financed a specific amount which included the interest you will pay. It sucks but how do you think they stay in business. It could help inprove your credit score, it shows you can pay off loans sooner then expected and for some reason, when people check your credit and see that, They like it! Hope this helped!

TheQuietThings

if you want to pay it off early, call toyota finance, and tell them you want to buy the car out NOW. They will give you a price, which will be lower than what you would have payed over the course of the finance period.

Otherwise, if you just keep sending them money, they arent going to cut you back interest.

bigmouth2008

So Toyota Financial is different from auto loans from other banks and institutions where if you pay more than scheduled payment, you actually save more on interests, right?

fivepointnine

no, it is just like every other financial institution, anything you pay over the minimum payment goes directly towards your principal and yeah, if you pay it off early it looks alright on your credit, ideally you want to pay for the entire amount of time, but if you pay it off a little early you will be alright.

Janizary

This information is patently incorrect.

• Yes, if you were to simply pay extra on every 'normal' payment submission it will not lower your principal amount. Toyota Financial Services applies any overpayments toward the next payment amount. It does not reduce principal. Please read your TFS loan agreement terms. It is quite clearly spelled out.

However

• You can make separate 'Principal Only' payments in a separate remittance which will be applied directly to the load principal amount. The address is:

Toyota Financial Services
PO Box 15012
Chandler, AZ 85244
(you must include a note stating the account number and 'PRINCIPAL ONLY' payment)

Or call TFS directly at 800-874-8822 and they can explain the 'principal only' payment process.

By paying a separate 'Principal Only' payments you will (1) reduce the time it takes to pay off the load and (2) reduce the pricipal amount external of monthly interest . Both combine to reduce the total amount of interest paid over the (now shortened) life of the loan.

And, just as an FYI, your loan payment amounts are estmates based on balanced monthly payments, paid equally over the life of the loan. Interest is not captured at the beginning of the loan, it is accrued over the life of the loan, based on interest rate, pricipal remaining outstanding, and the amortization schedule used by the loan provider.

fivepointnine

good info

Tenaj

Yep, what Janizary said is correct, I work at a credit union and the sooner you pay it off, the less interest you'll pay.

however it appears toyota financing is different in that the extra amount is applied towards next months payment.


at the beggining of your loan term, your principal is much higher and that 4.6 is a higher amount

near the end of your term your principal is much lower, your still paying 4.6 but its a much smaller amount.

the more you apply to your principal the less you'll pay in interest later

bigmouth2008

Thanks for your guys' clerification. So to put it in simple explanation, it's a very good thing to contribute extra payments or pay it off early, because your principle will be reduced faster and subsequently, the total interests you pay will be less overall.

alex8181

You are correct. You should make sure they apply your extra payment amounts to the principal only.

4Pointer

um, how did you get 4.6%?

trialsindude

mines was 4.4%

TheQuietThings

toyotas finance rate changes often. Per month actually i believe. My FICA is extremely high and i was still given a 5.1% interest rate.

jeffrgunn23

I wouldn't complain, here in Texas the best rate through Toyota is 6.6%!

LBTc06

I got 10.95% interest...

I have VERY LITTLE credit.

I plan on putting an extra couple of grand a year towards principle per year.

dp-_-

I just called that # up there that Janizary left and what he said was also incorrect.....

I've been paying $250 every two weeks to pay off my financed amount. If I'm understanding him correctly, this is all in vain and I've just been paying extra for no reason.

After speaking to the CSR, I was told that this was not true. She said, "yes, it is true that it technically goes towards your next month's payment...which is why you don't have a bill due until June, but the principal is in fact being paid off. Each time you make a payment, the interest is re-calculated and since you have paid off more than what you owe, the amount that the interest applies to is less, therefore, you're charged less on interest."

So it appears that paying ahead does in fact reduce the interest accrued........

Janizary

I would get what that CSR told you in writing. Please review your TFS financing contract. It is spelled out VERY plainly how overpayments are handled. Additionally, please reivew the 'fine print' on your statement, it is also spelled out there how overpayments are handled.

What is written in the contract and on the statements under the handling over overpayments is what is 'official'.

If there is a 'backdoor' method it was not mentioned when I called TFS to find out how to handle overpayments/principal only payments. They confirmed exactly what was written on the contract and explained exactly how to make principal only payments correctly. As an FYI American Honda Financial has the exact same procedure. (i.e., overpayments are credited towards future payments, not principal, and principal only payments must be sent under a separate remittance.)

Personally, I find the whole procedure to be a PITA. Under other auto loans, home loans, etc., I have usually had the option on the same remittance to indicate additional funds specifically for principal. Why TFS and AHF (and others I am sure) handle it differently is somewhat questionable to me.

I would suggest doing it the 'official' way, as your signed financial agreement supercedes a CSR's "don't worry about it" statement. But if you like to take the risk, please do so and report back in about 6 months with the 'actual' handling over the overpayment on your loan.

Better yet, ask them for a statement of account (it is free and you can request one from the CSR). Once you get your statement look to see if they have actually been applying overpayments to your principal or not. It will show up as a separate line item for each principal reduction, outside of your normal payment. Please let the folks here know if they have actually been doing that. I would hate for folks to take 'unofficial' advice and get stuck in the end.

4Pointer

looks like 6.9% even with 750-760 FICA here in SoCal. wouldn't it be better to find your own loan?

dp-_-

My sales contract says this:

1. Finance charge and payments
a. How we will figure Finance Charge. We will figure the finance charge ona daily basis at the Annual Percentage Rate on the unpaid part of the Amount Financed. Creditor - Seller may recieve part of the Finance Charge.

b. How we will apply payments.
We may apply each payment to the earned and unpaid part of the Finance Charge, to the unpaid part of the Amount Financed and to other amounts you owe under this contract in any order we choose.

c. How late payments or early payments change wat you must pay.
We based the Finance Charge, Total of Payments, and Total Sale Price shown on the front on the assumption that you will make every payment on the day it is due. Your Finance Charge, Total of Payments, and Total Sale Price will be more if you pay late and less if you pay early. Changes may take the form of a larger or smaller final payment or at our option, more or fewer payments of the same amount as your scheduled payment with a smaller final payment. We will send you a notice telling you about these changes before the final scheduled payment is due.

d. You may prepay.
You may prepay all or part of the unpaid part of the Amount Financed at any time. If you do so, you must pay the earned and unpaid part of the Finance Charge and all other amounts due up to the date of your payment. As of the date of your payment, if the minimum finance charge is greater than the earned Finance Charge, you may be charged the difference; the minimum finance charge is a follows: (1) $25 if the original Amount Financed is more than $1,000 but not more than $2,000, or (3) $75 if the original Amoutn Financed is more than $2,000.

Janizary

From the printed instructions on an old TFS billing statement I dug out of storage:

It is that notation that made me call TFS in the first place to find out how to ensure overpayments or additional payments were appropriately applied to the loan principal. The information I posted previously are the instrucations provided by TFS during that call. I can say with 100% certainty that my principal payments were correctly applied by following those directions.

(eidt) I'd be happy to scan and post it if needed.