Extra Car Loan Payments

in Debt Reduction


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I’ve been trying to pay down my car loan faster, so I’ve been making extra payments. I use my local credit union’s online bill pay which let’s me put a memo on my ‘checks’. I write that the extra payment is supposed to all go into the principal. Apparently that is not the case.

I called customer service and I was informed that I couldn’t make a payment directly towards principal.

Every payment I make goes towards the interest accrued from the last payment and the principal.  She suggested that I just put the extra money with my regular payments. I don’t want to do this for a couple reasons:

  • The extra $40-50/week (snowflake money) that I save I want to immediately put it towards the loan to make sure I don’t spend it.
  • I’m worried about the interest accruing between monthly payments.

I guess I’ll spend this weekend and see if I can find the cheapest route with this. I’ll being digging around Paid Twice to learn more about snowflaking.

Photo Credit: Rojer

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{ 7 comments }

1 RacerX February 22, 2008 at 10:51 pm

Cheapest will be to send it with the regular payment. the other option is to put it into checking as usually but post date the check. You won’t spend what you commit. You just have to hold the check then!

2 Green Panda February 23, 2008 at 12:09 pm

I’m really motivated to knock this loan out ASAP. Thanks for the suggestion RacerX.

3 Susan Flemming February 25, 2008 at 12:03 pm

I would suggest that you make an appointment to speak with one of the loan representatives at your bank. (ideally the one who gave you the loan in the first place)

Explain what it is you want to do and see if there is some arrangement you can make to ensure that the extra payments are applied to the principal of your car loan. Customer service reps are great for answering general questions, but only a loan officer can answer questions about the terms and conditions of your specific loan.

4 Sue February 25, 2008 at 1:49 pm

I am assuming this is a financed car. The online payment did not work for my financed
car. I needed to send a regular check for the principal payment.
For my leased car that I paid off first I sent in a principal payment with no problem.
The financed car required a manual check. For one of these, either the financed or
leased I needed to send the payments to a separate office.
I would recommend calling customer service back and ask where to send the payments
to pay down the principal.
Good luck.

5 Emma February 25, 2008 at 1:59 pm

That sucks. I remember paying extra on my Golf GTI. All the extra payments that I did make did go towards the principle, we had our loan through USAA though, not a DCredit union, maybe they work differently?

6 Green Panda February 25, 2008 at 10:12 pm

Susan: If I’m feeling better, I’m going to my local ranch and asking. Thank you for the suggestion.

Sue: It is a financed car. I’ll ask if they would accept that plan.

7 bethh February 27, 2008 at 5:22 pm

I have the feeling that the interest is calculated monthly, so if you pay extra now, there will be a smaller balance when the interest next gets calculated. I’ve been paying extra on my car loan, and it shows that it’s paid through January of next year, but I’ll be sending in the last payment next month. When I’m done I’m going to get the final information from them (if possible) to see exactly how much interest I paid.

Good luck getting your question answered, but the information might be on the small print of your loan paperwork.

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