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2011 Forester Auto
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225 Posts
Discussion Starter · #1 ·
In September I became the proud owner of my '11 Forester. I love it. Its MUCH roomier than my 2007 Scion tC, which I used as a trade in. So the amount I owe on the loan is 18,378.70 before I started payments. The monthly is 338.02. I have made 400 dollar monthly payments for the first 4 payments, last 4 months. The monthly payment is getting lower. Thing is, my payoff, recently is 17,786.45... Wheres the 1008.45? Id ask the finance company but they are out for the holidays.. Figured Id ask here and get someone instead of a machine or a company monkey.
 

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2011 Forester Auto
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225 Posts
Discussion Starter · #3 ·
How much of your monthly payment is interest and how much goes against the principal?
I have NO idea..

1st payment 338 (paid 400)
2nd payment 338 (paid 400)
3rd payment 276 (paid 400)
4th payment 214 (paid 400)
5th due jan 12th 152..

This is all new to me...
 

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Premium Member
2015 Highlander AWD XLE 6AT
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4,255 Posts
What's the interest rate on the loan?

Regards,
Jim / crewzer
 

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2011 Forester Auto
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225 Posts
Discussion Starter · #6 ·

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2014 Forester xt prem Cvt
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161 Posts
By paying more per month than required and not having go towards your principal, you're giving them an interest free loan. Meaning you're ripping yourself off.

You're monthly payment is getting lower because the amount you are paying each month is being carried over to pay for the next. I suggest paying only what you have to and making payments to principal only with extra money you got. Paying to principal reduces the amount you are taking a loan on, thus reduces your bill. If your bill is 338 total, 270 of that goes to pay for interest, the rest goes to paying down your loan. I used hypothetical numbers but shouldn't be too far from actual numbers. The banks want their money first, then once they are paid off, you get yours.
 

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2019 Crosstrek 2018 XT
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14,713 Posts
The only time in my whole life I ever took out a loan on a vehicle was when the interest I was paying was less than the interest I was making in my savings accounts. I then had second thoughts and decided to pay it off much quicker...but I then found out that they got 100% of their interest on the vehicle anyway.

Obviously I never did that again and never will...I'm 67.

You really sacrifice big time for the privilege of owning one of the most expensive items known to man..considering the depreciation, maintenance, and upkeep expenses. I would ride a bicycle before taking out a car loan.. [/rant]
 

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1998 Forester L Automatic
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269 Posts
9.59% is ursary.

Stop giving free money to the finance company. Pay them exactly what they require, and put the extra in a savings account.

Then, go to your bank (NOT a finance company) and ask about a car loan. See if they can beat the interest rate you're paying, reduce your payments, and get the interest on an accrued basis. Use the money in your savings account as a deposit on this, and get away from the finance company.

If I was your dad, however, I'd be saying "What on earth are you doing, taking out a car loan for that much when you haven't any money?!"

My 'Dave Ramsay' approach would be to sell the car, and buy one you can afford to pay for outright, and put the 'car payment' into an account until you can afford to upgrade for cash.
 

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2008 Forester X Premium 5MT
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8,064 Posts
Seeing as it is your first loan and lack of credit history. First automotive loan with no credit history often results in a stiff interest rate.

Another approach is to pay on time and the only amount required for the monthly payment. IE your next couple of payments pay only what is required.

After 6 months or so, try to refinance the loan with your credit union or bank.

Those first 6 months are usually enough to give you some credit history for your bank/union to work with. You will likely see the interest rate cut in 1/2.

We had to do this when the Misses bought her Forester. Her loan was 9.9% initially. After 6 months of payments we refinanced her loan with my credit union and got it down to 4.9%. She was a ghost as far as credit history went. No bad credit, no good credit, just plain no credit, we knew we were going to have to do this going in.
 

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Smooshed FOTY 2011
2005 Lifted 2.5 XT 5-Speed MT Dual-Range
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5,732 Posts
For being a first loan and little credit history, that's not a horrible interest rate, but it is your first car loan.

As been said, when you first start your loan, you are paying more towards the interest and less towards the actual principal. Sometimes, the way to get them to pay down your principal faster is to pay your normal payment, then make another one of whatever amount you wish and tell them to apply it to the principal. That will get your loan down faster. Only time it's worth it to me is if you double up on payments though.

I would, after several months, go to an actual bank (I have better luck and interest rates with Credit Unions) and see if they'll finance it through them for a cheaper rate.

Also, if you still have the option through your finance company get GAP coverage if you still can!
 

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2014 Forester XT Touring CVT
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This is a good example of why it is a good idea to get a credit card while in college to start building your credit history.

I bought my 2014 XT at the age of 22 and was able to get a 2.29% rate.

As others have said, try to build your credit and then refinance.
 

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2006 Forester LL Bean Auto
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205 Posts
Join a credit union now and look to refinance after 90 days. As others have said, the loan is pricey, but not the end of the world. The nice part about car loans is that there is no cost to have someone else refinance it. Put some cash aside just in case you need a better equity position with the new loan. (The new lender may require higher loan to value)
 

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2011 Forester Auto
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225 Posts
Discussion Starter · #17 ·
Yeah I had planned on refinancing in a few months through my bank. I knew I would have crap for credit history (none) and this would happen, but I needed something thats better in the snow than my tC.
 

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2019 Sport CVT
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791 Posts
... I then had second thoughts and decided to pay it off much quicker...but I then found out that they got 100% of their interest on the vehicle anyway. ...[/rant]
Unless your loan had a clause preventing an early payoff or a pay down of principle, then you are very incorrect.
 

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2019 Sport CVT
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791 Posts
9.59% is ursary.
... Stop giving free money to the finance company. Pay them exactly what they require, and put the extra in a savings account. ...

Aaaaaaaaaaaaahhhhhhhhhhhhhhhh!!!! NOOOOOOOOOOOO!!

At that rate you should be giving them every extra dime you can find in the couch cushions! BUT YOU MUST indicate that the extra is to be applied to the PRINCIPLE. If you don't specify, like you've probably been doing, then the extra will just go towards the next months payment instead of the principle.

Yes, try & re-finance but until then try and pay off some principle NOW which will save you 9.6% per year on every extra dime. If you put that money into a savings account, right now even Credit Unions are paying only like a tenth of a percent.

If you have an online account where you can schedule your payments look for where you can set the amount of additional principle to pay.
 

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12 Premium 5-speed
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4,486 Posts
What hogtown sez: Be certain to specify that the extra payment (kudos for doing that, by the way) goes straight to principal. A good lender will do that automatically: put it toward the principal; an iffy one will simply apply it to the interest portion of the loan, or will assume you're pre-paying the following months.

If you mail in the payment, the slip should have blanks where you specify that the extra money goes toward principal. If you pay online, you may need to go to a branch and talk to someone face-to-face to get that set-up.
 
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