For example, for a 5 year loan on a car purchased, is it true that the first few years of making payments go towards the interest only, then the last 2 or 3 years go towards principal? It just seems my total is taking forever to go down and Im on my 3rd year now. I keep trying to call my credit union, but cannot get through, otherwise I'd ask them. Will the amount start going down faster soon?

 

No, but depending on your interest rate it might feel that way.

Take a look at a payment calculator on a finance site and it will show you interst/principal over the term of the loan

 

Im paying 5.3 percent interest, but ya I'll check it out, thanks

 

Nice APR, I worked a good deal to get mine down to 5.9%

 

The amount financed, plus your finance charge over 5 years should all be calculated into ONE total which is then broken down over 60 months.

The payment should remain the same for 60 months. Take your balance and divide it by your monthly car note and it will tell you how many months left. Add that amount by how many months you have already paid on the car and it should equal 60 months.

Depending on the type of loan, you can pay off early and save money. Some loans you will pay the entire amount regardless so there is no benefit in paying early.

Also if you make additional payments, although it may save you money in the LONG run... your Monthly amount will remain the same until paid off.

Tim

 

Depends on the type of loan too. Most loans will decrease the amount of interest paid as the loan comes to term. a first payment of 400 might be 180 principle, 220 interest...in the third year, it might be 260 principle, 140 interest.

Just an overly simplified sample

 

i payed alot of interest the first year

 

Try to find a really good place that loan interest really cheap, then do the loan at the dealer to see if they would give you even more discount if you finance with them. Then you take out the cheap loan you found and pay off for the dealer's finance.

I hope you understand what i'm trying to get at. hahha Goodluck

 

I think it is fairly typical, for loans in general, for your early payments to be a lot of interest and little principal. This way, you end up paying most of the interest first, so if you try to pay off the balance early, you are still stuck with a large principal (i.e. you can't screw them by making your loan a "short-term loan" via early payment). You are already three years in, though, so your principal should be going down faster.

But the bottom line is this: take your monthly payment, multiply it by 60, and if that amount is equal to the total amount you should be paying (principal + interest over 5 years @ your rate), then you aren't getting screwed. It just might seem like it because of the way the payment is structured.

 

i was under the impression that: the total amount financed was based on vehicle price + interest charged for loan for (x)years. so say you borrow $18k. they're gonna charge you say $3k to finance that for 5 years. they then work out a payment plan that equals out to the entire $21k over five years, with the payment starting out interest>principle, and working down to principle>interest by the end of the five years. however...are you paying a set amount of interest regardless of the time you borrow it for? usually not...i don't know, are you paying a set amount of interest period, or are you paying a percentage based on the principle you still owe? i've always heard that if you double up on a payment, then the set amount still goes toward interest, but anything above that goes toward what's left of the principle, thus shortening your loan period and the amount of interest you end up paying. i don't know though, this is just what i've been told in the past...