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Thread: I got a car loan - being F*cked on interest!

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    God/dess Lysondra's Avatar
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    Default I got a car loan - being F*cked on interest!

    (I'm still around a bit... just to ask questions I know you guys can answer...)

    Well, I got a car loan... a 3k car and I'm paying $160 a month for 3 years... so this car will end up costing me over 5k (almost 6!!) by the time I bought it... grrr!

    The thing was, they were the ONLY one who would finance me... since it was a private dealership with in-house financing (which I -knew- pre-purchase was a rip-off, but what could I do?) and I'm not a citizen with a reliable proof of income (deposits, a few invoices, etc.. nothing continuous).

    My thing is I don't know...How exactly does interest work, though? They do a % based off what's left, right? So If I, theoretically, paid $1k a month... how much over would I have gone, monthly, based off the % for those years?

    I'm not exactly sure if I should keep it up for the three years to establish more Australian credit (as it's my first and only) or if I should pay it off quickly to get the 2.6 grand knocked off before I'm just paying off interest instead of the damn car...

    Which is most beneficial to my future in Australia?

    (PS: *&^^%^$&^^$# insurance!!! It's $1 a week less than the car itself!!! My international license only counts the time I've been in Aus... so apparently I've only been licensed for 11 months... not five years!)


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  2. #2
    Yekhefah
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    Default Re: I got a car loan - being F*cked on interest!

    I dunno if it works the same overseas, but here's what I'd do in the USA if I could afford it:

    Pay the $160 a month, like normal. Also send a separate check marked "principal payment only," to whatever address they tell you is appropriate for this (just ask whoever financed your loan). If you just wrote a bigger payment check it would include the original interest, but if you pay down the principal by itself then they have to re-calculate the interest and you pay less by moving quickly.

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    God/dess Lysondra's Avatar
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    Default Re: I got a car loan - being F*cked on interest!

    Huh... I don't do checks though.. it's automatically billed fortnightly and they take out more only if I call and ask them... no checks involved at all.

    :/

    I'll see if that works here.


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    Yekhefah
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    Default Re: I got a car loan - being F*cked on interest!

    Oh, right, I forgot nobody in Australia writes checks (or "cheques"). In that case, just ask them how you make payments to the principal loan, instead of the total interest-carrying balance.

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    Default Re: I got a car loan - being F*cked on interest!

    bankrate.com has a calculator that can help you work it out.



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    Default Re: I got a car loan - being F*cked on interest!

    That calculator is slightly off from my situation... thanks though... doesn't seem to quite work for what I'm looking for... especially since I don't know the exact percentage... plus mine is not paid monthly.. nothing is here.


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    Default Re: I got a car loan - being F*cked on interest!

    Quote Originally Posted by Yekhefah View Post
    .........just ask them how you make payments to the principal loan, instead of the total interest-carrying balance.
    I agree ask them. Also ask them about if you paid it off early (ie you only had $2000 left to pay on the loan and wanted to pay that $2000) would you incur any fees ? Some loans if you pay it off earlier than was originally agreed upon do attract fees (silly, yet they do).

    In re the insurance, who are you with ? Did you "shop around" as there are shitload of insurance companies around. Plus make sure you are also with RACQ if you are not already... they are good for if you have a flat battery, lock your keys in the car, break down and so forth. Members get special discounts and treatment and it really isn't all that much.

    This is why cars are called "bad debt" and I always try to own it out-right instead of paying it off because by the time you had paid it off ... it won't be worth anywhere NEAR that amount! Just the thing that irks me about cars. We need them for work yet they cost us alot to keep. *sigh* :rolleyes:


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    Default Re: I got a car loan - being F*cked on interest!

    car loans here are not like mortgage with a principal and interest payment. They figure out the interest and add that to the value of the loan and you pay one big loan.

    So let's say your total payments are $6000 for a $3000 car. You are essentially only paying interest for the first half of the loan. They are banking on you selling the car and being upside down on your loan. And for some reason you might sell the car after a year and owe $4000 on a $3000 car. I found this out the hard way when I half-way played with the idea of selling a 1 year old car that I bought new. I owed more on it than it was worth even though I had made 20% of the payments.

    So screwed up, but car sales is not known for being the most ethical of businesses.

  9. #9
    PhillyDancer1982
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    Default Re: I got a car loan - being F*cked on interest!

    Quote Originally Posted by lilithmorrigan View Post
    PS: *&^^%^$&^^$# insurance!!! It's $1 a week less than the car itself!!! My international license only counts the time I've been in Aus... so apparently I've only been licensed for 11 months... not five years!)
    Don't feel too bad, Lilith Morrigan...I've been there too, but worse. When I was still living in Philly, my insurance(per month) was MORE than my payments...nearly $100/month more! Plus, I had a valid driver's license for SEVEN years and I wasn't that much of an at-risk driver(I had one minor speeding ticket and a fender-scratch "accident" that incurred costs only $63 above the $1500 legal cut-off for raising your insurance rates; what this means is, most insurance companies in PA do not count an "at-fault" accident against your insurance rates if the incurred damage is less than $1500).

    As far as what you should do, you should diligently pay the loan on-time for 12-18 months, then try refinancing. By that point, you should have a decent amount of credit history established with that loan. To further build credit, you should think about getting a secured credit card(you pay a deposit for the card, but you get your deposit+interest back after a year of on-time payments; it's a much better deal than paying like $250 in fees for a subprime/predatory lender credit card with a $300 limit). These two accounts(the loan + a credit card) should build up your credit significantly so that when you apply for refinancing, you will get a lower interest rate.

    My so-called "friend" Geek Joe says that the "magic number" for paying off a car loan is 24 months. I don't know how accurate that is, but I think what he means is, paying off a car loan before the 24month mark doesn't establish a long enough credit history for that loan; but paying it off moderately early, such as at 24months, establishes long enough credit history but also shows that you are ahead of the game by paying it off early. So if you don't want to refinance, paying off the loan early but not too early(i.e., at 2yrs instead of 3yrs) seems like a good idea.

  10. #10
    PhillyDancer1982
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    Default Re: I got a car loan - being F*cked on interest!

    Quote Originally Posted by Emily View Post
    car loans here are not like mortgage with a principal and interest payment. They figure out the interest and add that to the value of the loan and you pay one big loan.

    So let's say your total payments are $6000 for a $3000 car. You are essentially only paying interest for the first half of the loan. They are banking on you selling the car and being upside down on your loan. And for some reason you might sell the car after a year and owe $4000 on a $3000 car. I found this out the hard way when I half-way played with the idea of selling a 1 year old car that I bought new. I owed more on it than it was worth even though I had made 20% of the payments.

    So screwed up, but car sales is not known for being the most ethical of businesses.
    Yeah, I noticed that my student loans work the same way...I cannot put my additional payments towards the principle, thus leaving me paying the same amount of interest in the end, whether I pay it off in the required 10yrs or if I pay it off early in 8yrs. I do not like that, but hey...isn't the interest paid on student loans tax deductible?(correct me if I'm wrong)

    As far as car loans go, actually my loan DOES allow paying down the principle early. When I signed for my car at the dealership, I was actually advised to do that to save paying all that interest. I just have to specify to the bank whether I want my payment to go towards the interest+payment for the next month, or if I want it to go towards paying down the principle of the loan. But I think that option is only available for prime-rate loans from certain banks. It sounds like Lillith Morrigan has a subprime/predatory lender loan. In that case, yeah paying down the principle is probably unlikely, since subprime lenders are bent on usurious tactics any way they can. My friend "Randy" has such a loan...21% APR from HSBC(the worst bank in existence!), and he's not allowed to pay down the principle early.

  11. #11
    Yekhefah
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    Default Re: I got a car loan - being F*cked on interest!

    Oh yeah, DEFINITELY get RACQ!! It'll work in other states as well. RACT bailed me out of a bad situation in Tasmania and it didn't cost me anything because I was an RACQ member.

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    Default Re: I got a car loan - being F*cked on interest!

    Diligently pay you high interest car loan for one year, then afer you have established credit you can get a loan from your bank and transfer the loan. Not exactly sure how that works, but it was offered to me here in the states.

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    Default Re: I got a car loan - being F*cked on interest!

    ^^^but then you still have to pay the same amount of interest, depending on the loan. The only reason to refinance a car loan is if you didn't prepay interest or you want to extend the number of payments.

  14. #14
    PhillyDancer1982
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    Default Re: I got a car loan - being F*cked on interest!

    ^ ^ Really? I thought the reason that people refinance, is to lower their interest rate. My friend M--k is trying to convince me to refinance, because he thinks that I can get a lower interest rate, now that I actually have some car loan history established(the car loan that I have now is my first one). He showed me some numerical figures showing that I can get a shorter-term loan(so that the total amount of time I'd be paying on the loan wouldn't be longer than the term of the original loan), but less expensive payments due to smaller interest. I'm trying to carry out the loan that I have now, because the interest rate isn't bad(although it's not spectacular), and I'd like to establish a long history of payments with my current loan...which won't be that long, since I'm planning to have the loan paid off by the 2yr mark or not much longer. I didn't know that about refi though.

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    God/dess Lysondra's Avatar
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    Default Re: I got a car loan - being F*cked on interest!

    Alright, I guess I'll just be good and pay it off over a year instead of three... making on-time over-the-limit payments paying off the entire loan... for $5,600. Crapola.

    It's the best I could do.. and we (me and the car company) both knew it.. so they knew they could fuck me, and I knew I couldn't not be fucked.

    Oh well.. kinda what I had to do, given the situation.

    Thank you!


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    Yekhefah
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    Default Re: I got a car loan - being F*cked on interest!

    Did you ask them how to make payments on the principal? They're happy to tell you, if you just ask.

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    Default Re: I got a car loan - being F*cked on interest!

    Emily said I couldn't... but I'll ask anyway... :/


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    Default Re: I got a car loan - being F*cked on interest!

    Ummm....its a $3,000 loan, not too bad. Lil, your situation is looking better, there appears to be a light at the end of the tunnel.

    Pay the car for one year, then pay it OFF! Save aggressively until you have the money. You'll have already paid almost half of the loan off. Then just get rid of it. If you can't save 2K in a year's time, well, I don't know what to tell you.

    Use a better method to establish credit, like a card or a secured loan. Getting upside down on a car is a risky venture simply to build up credit.

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    Default Re: I got a car loan - being F*cked on interest!

    Quote Originally Posted by Katrine View Post
    Ummm....its a $3,000 loan, not too bad. Lil, your situation is looking better, there appears to be a light at the end of the tunnel.

    Pay the car for one year, then pay it OFF! Save aggressively until you have the money. You'll have already paid almost half of the loan off. Then just get rid of it. If you can't save 2K in a year's time, well, I don't know what to tell you.

    Use a better method to establish credit, like a card or a secured loan. Getting upside down on a car is a risky venture simply to build up credit.
    Yes, come to Australia as a foreigner and get a credit card or secured loan. No, really... just try.

    And yes, I can pay it off... it's just paying 5.6k for a 3k car loan seems a little shit to me, okay? Almost 2x the price!

    I can pay it off x2 as I go... it's no problem, the payments... where did I say it was?

    I just needed this to establish any form of credit.. no really, I did. No joke.


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    Featured Member scorpio's Avatar
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    Default Re: I got a car loan - being F*cked on interest!

    sorry, banks are under no obligation to apply any extra payment to pricipal unless it is specifically spelled out like that in your contract.

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    God/dess Lysondra's Avatar
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    Default Re: I got a car loan - being F*cked on interest!

    Quote Originally Posted by scorpio View Post
    sorry, banks are under no obligation to apply any extra payment to pricipal unless it is specifically spelled out like that in your contract.
    It was in-house financing. No bank. Still count?


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    Default Re: I got a car loan - being F*cked on interest!

    Quote Originally Posted by lilithmorrigan View Post
    Yes, come to Australia as a foreigner and get a credit card or secured loan. No, really... just try.

    And yes, I can pay it off... it's just paying 5.6k for a 3k car loan seems a little shit to me, okay? Almost 2x the price!

    I can pay it off x2 as I go... it's no problem, the payments... where did I say it was?

    I just needed this to establish any form of credit.. no really, I did. No joke.
    Ok, ok, I'm sorry. I really was trying to be helpful, this is not attack from my side. I can be a cranky bitch sometimes, and I apologize for lashing out to you in the past.

    I don't understand something then. Why would the car cost you $5,600 if you paid it off in a year? Sure, you would be paying extra in interest, depending on the percent and compounding frequency. But if you let it go for 3 years, you're paying the extra because of the interest has been compounding for 3 years, not in spite of it. Right?

    Edit: Ok, I see, even if you pay it in a year, it would be more than double price? Never mind......

    Edit again: so you're effectively paying 48.7% interest on this car if my calculations are correct

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    God/dess Lysondra's Avatar
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    Default Re: I got a car loan - being F*cked on interest!

    Quote Originally Posted by Katrine View Post
    Ok, ok, I'm sorry. I really was trying to be helpful, this is not attack from my side. I can be a cranky bitch sometimes, and I apologize for lashing out to you in the past.

    I don't understand something then. Why would the car cost you $5,600 if you paid it off in a year? Sure, you would be paying extra in interest, depending on the percent and compounding frequency. But if you let it go for 3 years, you're paying the extra because of the interest has been compounding for 3 years, not in spite of it. Right?

    Edit: Ok, I see, even if you pay it in a year, it would be more than double price? Never mind......

    Edit again: so you're effectively paying 48.7% interest on this car if my calculations are correct
    Hey thanks, that really means a lot to me. I just get a little jilted when you post and always think it's a personal attack... it's one of the reasons I'm trying to refrain from posting as much.. I realized I pissed a lot of people off.

    ...

    I believe that's right... I'm really bad with figures but I knew if I didn't sign that sheet of paper NOBODY would finance me... they knew it too... so... it's not like I went into this going, "Gee, I can haggle!"... no, I was stuck with what they offered.


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    Default Re: I got a car loan - being F*cked on interest!

    Well........I guess you can wait and see perhaps? Can you still payoff extra every month just to stay somewhat ahead on the rate of interest? Of course, they can apply the extra payments only to the principal and not the interest at all, allowing it to continue to compound even higher.

    Here is my experience with my family in regards to this exact subject. We moved to the US as refugees. trying to get citizenship. One year later my parents bought a home at 14% mortgage interest. After a year or two they re-financed it because we became legal residents. But they just ate the cost for the initial time because they knew it would help immigration think we were staying.

    U.S., OZ, wherever, I believe this type of financing is pure usury, and unfair to you and everyone forced into it. But if we don't have credit, its like we are persona non grata. Its a fucked system, I'm sorry you're having to deal with it.

    "Have you ever been to American wedding? Where is the vodka, where's marinated herring?" - GB
    "And do the cats give a shit? No, they do not. Why? Because they're cats."-from The Onion

    Quote Originally Posted by Mia M
    If a cupcake was tossed at me... well, I'd only be upset if it missed my mouth

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    Featured Member scorpio's Avatar
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    Default Re: I got a car loan - being F*cked on interest!

    Is it compounding interest, or simple interest? Auto loans usually, by law, are simple interest, which means you only pay for the interest you use, not for the whole amount owed if you pay off at the end of your payments.

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