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Old 07-17-2017, 03:47 AM   #1
Gel Mibson
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Default question for those who have a long term (72+ month finance)

do you have a simple interest contract without prepayment penalties?

i'm tempted to leverage a long-term loan to give myself the flexibility to pay more towards the principal, eventually paying off the car note in full within 48 months. wondering if anyone is doing anything like this currently as i'm about to pull the trigger on a custom 18 wrx limited. thanks.
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Old 07-17-2017, 03:54 AM   #2
gjkrisa
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If I understand the question I believe you don't get penalized but will just need to pay all the interest also that you would have paid in the 72months so your not gaining money unless the bank can put in writing that if you get 72 months but do double payment you can pay less overall
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Old 07-17-2017, 04:02 AM   #3
Gel Mibson
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Originally Posted by gjkrisa View Post
If I understand the question I believe you don't get penalized but will just need to pay all the interest also that you would have paid in the 72months so your not gaining money unless the bank can put in writing that if you get 72 months but do double payment you can pay less overall
thanks for the reply, but you're describing a precomputed interest contract. with a simple interest, your interest amount depends on your principal balance so the more you pay off, the less interest you pay.
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Old 07-17-2017, 07:24 AM   #4
rtv900
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Quote:
Originally Posted by Gel Mibson View Post
do you have a simple interest contract without prepayment penalties?
.
So people actually agree to loans where you are penalized for paying more than a minimum payment?
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Old 07-17-2017, 07:44 AM   #5
Gel Mibson
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Originally Posted by rtv900 View Post
So people actually agree to loans where you are penalized for paying more than a minimum payment?
a lot of people don't ask or read the fine print before agreeing to a type of loan. some lenders do charge you a penalty for early payment if you have a simple interest contract. if you have precomputed interested, there's no benefit to paying early bc you're basically agreeing to pay the full interest charges no matter what.
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Old 07-17-2017, 07:48 AM   #6
Jack
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I don't think fixed interest (you have to pay all the interest even when you pay extra) loans have been around in the US for 40 years. Certainly none of the ones offered by Subaru have this.

If you're considering a long loan, understand that it's probably going to come with a higher interest rate, so you're paying more even if you overpay towards principal.
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Old 07-17-2017, 08:11 AM   #7
Gel Mibson
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thanks for the reply and yes i agree. i'm seeing around 1.5% increase in rates for anything beyond 60 months. i dont mind paying ~$1K in additional interest for some flexibility.
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Old 07-17-2017, 09:23 AM   #8
Dark5oldier
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You have to look at the wording in your loan contract. I went with a 72 month loan on my subie because I received the same interest rate of 2.49% regardless if it was 60 month or 72 month. And no prepayment penalty so It provides flexibility should something go wrong, but still allows me to pay off early (before the standard 60 months) and save money.

Most car loans are the same but not all. Ask the finance officer helping you and ask to see the writing in the contract to verify.

If you go outside Subaru you may see an increase in the interest rate depending on what special offers are available.
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Old 07-17-2017, 06:53 PM   #9
joesstripclub
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We bought our 17 WRX Limited in January and did the 60 or 72 month financing that Subaru had available at the time. We are paying almost double what the payment is each month to pay it off faster but we did the long-term financing just in case something were to happen and we needed that lower payment. Even confirmed with the finance guy at the dealer that there was no penalty for early repayment.
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Old 07-17-2017, 08:25 PM   #10
Berserker2
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The Subaru dealers in my area do their financing through Chase.

Chase does simple interest auto loans. Here's a PDF explaining exactly how they apply your payment.
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Old 07-17-2017, 09:58 PM   #11
FLTFOUR
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Quote:
Originally Posted by Berserker2 View Post
The Subaru dealers in my area do their financing through Chase.

Chase does simple interest auto loans. Here's a PDF explaining exactly how they apply your payment.

Good link, thanks!

I pay early each month and on top of my monthly payment I do an additional principal payment. That way I reduce my principal amount quicker and pay less interest in the subsequent months as a result.
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Old 07-18-2017, 09:32 AM   #12
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Quote:
Originally Posted by FLTFOUR View Post
I pay early each month and on top of my monthly payment I do an additional principal payment. That way I reduce my principal amount quicker and pay less interest in the subsequent months as a result.
This is the best way to do it. Make sure your payments are low enough to do this.
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Old 07-18-2017, 06:22 PM   #13
ab0815
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I financed mine though Chase and Subaru. When I pay I have an option to pay extra towards the principal, but you have to check the appropriate box (if you do not pay online) so that the extra funds go to the principal and not just an "overpayment"
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Old 07-18-2017, 08:00 PM   #14
blackseafleet
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i always overpay and send extra to principal. i put a hefty down payment. i know it's wasting money but if i have a bad few months i can manage my regular payment without hassle.

no penalties for overpaying on the chase loans.
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Old 07-19-2017, 05:41 AM   #15
Gel Mibson
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Quote:
Originally Posted by ab0815 View Post
I financed mine though Chase and Subaru. When I pay I have an option to pay extra towards the principal, but you have to check the appropriate box (if you do not pay online) so that the extra funds go to the principal and not just an "overpayment"
if i'm not mistaken, in order for your extra payment to be 100% applied to principal don't you have to pay it on your due date?
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Old 07-19-2017, 02:29 PM   #16
Kokin
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I got my WRX off Craigslist since hatches were all gone by the end of 2015 and did a 60-month finance from Bank of America. My regular monthly payment is around $240 and I put an extra $760 towards the principle as a second payment. They don't charge any prepayment fees for the $760 payment.

I also thought if there were to be any emergencies or big purchases a certain month, I would just do a regular payment. Aside from the first few months, I ended up just doing the $240/$760 payments each month. Car will be paid off early next year, for a total of 29-30 months.

If possible, you can try doing a refinance about a year or two into the loan. I went from a super high 6.59% interest to 3.14%. I basically had no credit when I got the car, but nowadays my score bounces between 760-800.

Good luck and enjoy the WRX!
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Old 07-21-2017, 12:13 PM   #17
Shadowbaron
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Quote:
Originally Posted by Gel Mibson View Post
if i'm not mistaken, in order for your extra payment to be 100% applied to principal don't you have to pay it on your due date?
Nah, you can throw extra money at a loan whenever you want. There should be a checkbox or a separate entry field for "Principle Payment." Otherwise the extra payment may be considered as paying for the next month's bill early.

When I was paying off my last car loan (through Chase) I would throw random $500 extra payments in the middle of the month toward the principle.
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Old 07-21-2017, 07:03 PM   #18
424wrx
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Originally Posted by Shadowbaron View Post
Nah, you can throw extra money at a loan whenever you want. There should be a checkbox or a separate entry field for "Principle Payment." Otherwise the extra payment may be considered as paying for the next month's bill early.

When I was paying off my last car loan (through Chase) I would throw random $500 extra payments in the middle of the month toward the principle.
i did the same thing. i had a loan for my wrx back in 2008 for 6 years. i payed it off in 3 years. i would send a chunk of cash here and there towards the pricipal. my principal actually went to a different address than the monthly payment. no car payments are nice these days. all 3 of our subarus are payed off.
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