Pay the piper or keep paying?

Discussion in 'Random Ramblings' started by EweSheep, Dec 3, 2010.

  1. EweSheep

    EweSheep Flock Mistress

    Jan 12, 2007
    Land of Lincoln
    We just got a new 2000 Dakota truck for hubby to drive to work. Beautiful truck!

    Now, seeing the loan that he signed....everything seems to be in order except for this crazy thing called early payment penalty....of $350 IF we paid the truck off before the loan is expired in three years. I've never had that on two other cars, which we did pay it off waaaaaaay early by using our income tax paying it off the following yearwithout paying penalty.

    So should I grin and bear it paying three years to avoid paying the fees OR see what my interest rate would be at the end of the year to see if it is cheaper????

    What would YOU do?

    If I can figure out the loan at $4,875 purchase price at 6.75% for three would it be cheaper to pay off the truck earlier anyway because they will collect MORE on the interest rates in three years time??????????

    My math sucks!
    Last edited: Dec 3, 2010
  2. Whitehouse Quail

    Whitehouse Quail Chillin' With My Peeps

    Jul 1, 2009
    If my math is right....

    Each year the collect $109.6875 in interest a year (2.25% a year). So it all depends on when you pay, paying $350 extra at the end of the second year wouldn't be worth it.

    Hope this helps! [​IMG]
  3. sonew123

    sonew123 Poultry Snuggie

    Mar 16, 2009
    onchiota NY
    well I figured it out to come to 308.9525$ in interest so paying it off before the 3 years will cost you more:) but only by 69$ if my math is correct??
  4. Spookwriter

    Spookwriter Overrun With Chickens

    Feb 23, 2010
    Dumb as it sounds...I'm told that paying a bank loan off early
    actually HURTS your credit score. Now that makes a lot of sense
    doesn't it?

    You will likely be within a few dollars either way if the loan gets to
    the second year. If you have the payoff, make the bank work for the
    money...deposit the payoff amount in a separate account with the sole
    purpose of one check a month to the bank. Go to term.
  5. domino7

    domino7 Chillin' With My Peeps

    Jan 4, 2009
    N.E. Ohio
    Your toatl interest if stringing the loan out will be $523.92. If you pay it off before you've paid $150 or so in interest you'll come out ahead. $173.92 is the most you could possibly come out ahead by paying it off.
  6. EweSheep

    EweSheep Flock Mistress

    Jan 12, 2007
    Land of Lincoln
    I'd rather hurt my score paying off the truck rather than keep paying if heaven forbid, when hubby is out of work or laid off for some reason. Security is the thing here with us, if we got the money to pay it off, pay it off and have some money we can spend on something else. I dont like the idea of a bank "controlling your credit score" at this day and age when you just don't know when your next paycheck or work is going to be like in a couple months.
  7. EweSheep

    EweSheep Flock Mistress

    Jan 12, 2007
    Land of Lincoln
    Quote:If it is cheaper to keep paying three years, we can put the pay off money into the savings and let them collect off of that if they are able to.

    Not easy to determine whether the $350 dollar payoff penalty fee AND deal with credit (by the way, hubby has excellent credit while mine was bankruptcy seven years ago) VS the interest rate.
  8. WingingIt

    WingingIt Chillin' With My Peeps

    Apr 16, 2009
    Quote:I rounded, so I came up with total interest over the three years of $524, but I agree with domino on all of this.
  9. WingingIt

    WingingIt Chillin' With My Peeps

    Apr 16, 2009
    I wouldn't worry about paying it off early hurting your credit, honestly. I've had two vehicles with payments in my life and paid both of those off WAY early (like half the time or less) and my credit score is excellent. In fact, we bought a house right after paying off the second one and they were thrilled when they pulled up the credit report because it would make things much easier on the mortgage stuff. The main thing is to NEVER pay late....and be sure you DO pay it off completely, of course.
  10. math ace

    math ace Overrun With Chickens

    Dec 17, 2009
    Jacksonville, FL
    I disagree with prepayment penalities in principal.
    I would refuse the loan and do some shopping around.

    There is no reason for a bank / lender to insist on a prepayment penality unless the interest rate is high and they want to ensure that they get their monies one way or another. . . .

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