[Debzer]

My loan will be from Bank of America. I've heard some people are disappointed because Ally holds payments prior to applying them. The reason they do this is because the longer they wait to apply the payment, the more interest they can take. This is how a simple interest loan works. The workaround is to divide your payment in 2 and pay twice a month. For example, if your payment is $500,send two $250 payments 15 days apart. This way the principle gets applied twice instead of once. DON'T MISS ANY PAYMENTS!!!! And start with the half payments after you make your next full payment.

[KyleL]

But if they hold payments for that month and apply it later, then they collect less interest the following month, since interest is compounded daily. But if you pay on the same day every month, and the hold period is the same, then the interest collected will be the same since its applied at the same time every month.

Best ways to avoid paying out interest are by paying bi-weekly since some months you'll make 3 payments, which can reduce interest and save time off the length of term. Or just divide the monthly payment by 4 and pay that amount every Friday if you're a weekly-paid employee like me

[crabman]

The best way is to pay cash. Alternatively you can take a loan out from your SEP, 401k, etc and pay interest to yourself. It's a good way to sneak more money into your retirement if you're capped.

[Cam 6]

Originally Posted by crabman

The best way is to pay cash. Alternatively you can take a loan out from your SEP, 401k, etc and pay interest to yourself. It's a good way to sneak more money into your retirement if you're capped.

There is a penalty for removing retirement funds outside of a hardship situation, correct? I'm thinking it is 10%.

[KyleL]

It's still 10% even with a hardship situation

[cellsafemode]

if you paid bi-weekly it amounts to making 13 monthly payments for every 12 month period. I think over a 72 month loan, this amounts to reducing your term by 5 months or so.

[Zeke.Malvo]

Originally Posted by Cam 6

There is a penalty for removing retirement funds outside of a hardship situation, correct? I'm thinking it is 10%.

You can take a loan out from a deferred comp savings plan with zero penalty (other than a $25 processing fee), and the interest on the payments goes to yourself.

You would have to do the math if makes complete sense. If you're deferred comp account makes a significantly a higher return rate than the interest on your loan, it may make more sense to just get a low interest conventional car loan. Talk to your financial advisor to see which stretches your dollar best.

[Zeke.Malvo]

Originally Posted by cellsafemode

if you paid bi-weekly it amounts to making 13 monthly payments for every 12 month period. I think over a 72 month loan, this amounts to reducing your term by 5 months or so.

Yes, but you also end up paying less on interest too because it compounds for a lesser amount of time. So it lops off another couple of payments besides the extra month yearly.

[6th Gen SS]

Wouldn't it be easier just to re-fi thru a credit union or a bank that doesn't have those business practices???

[crabman]

Originally Posted by Cam 6

There is a penalty for removing retirement funds outside of a hardship situation, correct? I'm thinking it is 10%.

Nope, done it. You will pay penalties to withdrawal it, you are not. You are taking it out and putting it back in with interest. It must go back and there are time limits but it can be done. Great way to reduce your income when the investments themselves are flat. See your investment counselor to learn more if you're interested.

[mt3130]

I finance through whoever has the lowest rate, but I generally don't even consider offers above 2%.

[cellsafemode]

Originally Posted by Zeke.Malvo

Yes, but you also end up paying less on interest too because it compounds for a lesser amount of time. So it lops off another couple of payments besides the extra month yearly.

That's with interest savings. Assuming about 2.5%. You can verify on one of many car loan calculators that support biweekly payment methods to expedite payoff

[Wizard1183]

over the course of 5 yrs if you financed for that length, how much do you save in interest going the route mentioned? $300? I wouldn't imagine it'd be that significant. just pay the note an own the car when you're done.

[01pewterz28]

I have had them for 2 years no issues but I have 0% so maybe that is why I have not had an issue.