Just wondering after looking a Ford credits web site concerning my loan iI noticed the interest paid varies every month. I have had more that one car finace in my life and best I recall on simple interst loans the interst is paid for the most part on the front end. every month the blance drops nad so does the interest. so at the end of the loan for the most part you amt to princaple is high and the interst is low. every month the interst payment is less and less. well mine goes up and down on the interst in excess of $100 dollars some months. payment is the same every month always early and about 30 dollars more than due. i call them and they informed me my interest was based on a daily rate. they informed me that some month have more or less days than others and when you make your payment????

 

It's possible that the interest would fluctuate a little bit due to a daily rate. Some months have 30 days, other 31, so a daily rate will cause a minor fluctuation, but not $100/ mo. Check your contract- it sounds like you have a variable-rate loan, where the rate changes with the prime rate, but the monthly payment stays the same. Then, at the end of your loan, the bank will add or deduct payments depending on where the final rate ends up. If the rate over the length of your loan has gone up, then you'll owe some more payments. If the rate has dropped on average, then you'll get a rebate check from the bank. If it is a variable rate, that has to have been disclosed in the papers that you signed.

 

No it is a simple interst vechile installment loan. I also noticed that the payoff is way out of line. I am going to call a consumer lawyer as soon as i get the chance. something smells very bad

 

A P R is

After P........? Rebate

 

APR comes right after MAR, and just before MAY!

Rick

 

yo Shane,
This is from the Navy Fed Credit Union:
"Interest rate adjustments
Interest rate adjustment is the amount of change, in basis points, that the base interest rate on a variable-rate loan changes. The interest rate is usually adjusted once a year, on the adjustment date, to reflect changes in the base rate. There are one hundred basis points in one percentage point. The interest rate on a variable-rate loan is the sum of a base, or index, rate and a spread to reflect the credit risk of the borrower."
Note that it can be adj once a year.

and:
"Interest rate
Interest rate is the cost of borrowing money as a yearly percentage. For investors, interest rate is the rate earned on an investment as a yearly percentage. The simple interest rate is interest paid or received divided by loan or deposit. For example, $100 in annual interest on a $1,000 loan or deposit is a simple interest rate of 10%. Compounded interest rate is determined by the frequency of interest payments during the loan or deposit term. For example, a 10% loan or deposit that is compounded quarterly equals a compounded rate of 10.38%. If compounded daily, the compounded interest rate increases to 10.52%. (For CD investors, compounded interest rate is called annual percentage yield.) Effective interest rate, or annual percentage rate (APR), is the true interest cost of borrowing. It includes fees and points you pay for a loan in the calculation. As a result, effective interest rate is higher than simple interest rate."
Note; "daily"

 

APR = Annual Percentage Rate

Something doesn't sound right, shane. Definitely have their customer no-service department explain it to you in detail and keep them on the line until you understand. If that doesn't satisfy you, check with a CPA.

 

As a current accountant and former bank employee, I can definitely say that the interest on a fixed rate loan could very easily vary by $100 from payment to payment.

It just takes a little thought to understand. The APR is broken down into a daily rate because of the varying days in a given month. Hypothetically, your payment is due on the 15th of the month and you paid your previous payment on the 15th, but this time you pay early on the 10th so there were only 25 days of interest for that time period. Now next month you don't pay until the 20th, so you have your base 30 days + the 5 from the month before + the 5 you're late. So this payment had 40 days of interest, that means an entire 15 extra days of interest you have to pay before you touch principle. But when averaged over the life of the loan, you still are just paying 30 days of interest per payment.

So from our little example, depending on your interest rate and balance on your loan you can easily see your interest fluxtuate between payments. The only way to make it consistent is to take a calander and make your payment based on every 30 or 31 days regardless of due date (as long as you don't fall out of your grace period and have a late penalty).

And that concludes our financing lesson for this afternoon.

PS-If you're still uncertain, make sure to visit your bank and have them explain it. It's just common sense to make sure they are doing what the finance agreement states.

 

wonder what happened?...shane...shane?