I’m quick to discount the honesty and integrity of loan companies. OK, let me put that in more accurate terms…
I think loan companies are as trustworthy as criminals.
But, I will fully admit when I am pleasantly surprised by lenders (it doesn’t happen often).
I sent the most recent truck payment and was a bit angry when I received my payment coupon a few days later. The coupon noted my next payment due date – late summer of 2011. I distinctly noted ‘PLEASE APPLY THE EXTRA PAYMENT AMOUNT TOWARD PRINCIPAL. DO NOT ADVANCE PAYMENT’ on the payment coupon I mailed with my check.
I e-mailed Toyota financing and asked them to explain how payments were applied and, if I my payment was improperly credited, to remedy the situation immediately.
Within 24 hours of my initial e-mail, Toyota responded, “Thank you for contacting Toyota Financial Services. Interest is calculated on your loan using the simple interest method. This means that any funds received in excess of the amount scheduled are automatically applied to the principal loan balance.
Any payment in excess of the standard monthly payment, given that there are no late or miscellaneous charges on your account, is applied to the principal balance of your loan. As a result of our billing method, the subsequent billing statement will show that your account is paid ahead. The net result with your type of loan is that extra funds are applied to principal.
For verification, we will mail an account history to the address listed on your account. This will provide a list of all payments received as well as a breakdown of principal and interest for each payment.”
The day after I received the Toyota e-mail, I received the financial breakdown in my mailbox.
I won’t ever get another car loan but I was impressed at the level of response from an auto lender and can’t help but wish…
My home loan could be financed through Toyota.
Do you think they would finance me if I said it wasn’t a house but a several hundred thousand dollar Toyota Sequoia?
Oh, and about the whole principle vs. principal debate brought up in the earlier post, it made me feel better when Toyota wrote ‘principal’ in their response and Wells Fargo also addresses it as ‘principal’. Frankly, I don’t know which is which. ; )
Beks is a full-time government employee who enjoys blogging late into the night after her four kids have gone to sleep. She’s been married to Chris, her college sweetheart, for 15 years. In 2017, after 3 long years working the Dave Ramsey Baby Steps, they paid off more than $70K and became debt free. When she’s not working or blogging, she’s exploring the great outdoors.
It’s great that you are paying ahead on your vehicle. Pretty soon the payment coupon will say 2012 on it!
Both Toyota and Wells Fargo have it correctly. So, you can follow their example when next you need to discuss either loans or school headmasters. 😀 You would discuss the principle of whether walking away from a loan is morally right or repugnant.
That’s always a great feeling get ahead on a loan. well done!
Kudos to Toyota financing.
And a little mnemonic device for the principle/pal thing:
The principal of your school is your pal.
In other words, only a person can be a “pal”. Everything else is “ple.”
Principal is the $$$ you borrowed from your PAL. Principle is the moral reason you pay him back.
In principle, getting sent to the principal’s office will result in getting reminded of the principles we are supposed to live under.
The capitol/capital thing used to get me, till someone pointed out that the O in capitol is like the dome of the capitol building in the capital city.
Toyota has a separate address that you have to mail payments to for them to apply to the principal. They won’t apply overages that way. And whoever you talked to on the phone was lying. I wrote two separate checks to Toyota every month until I got fed up and moved my loan to my credit union instead.
Susan – They wrote me a letter, I didn’t talk to them on the phone. The separate address is for payoffs only according to their letter to me. They also sent a principal/interest statement that confirmed what they told me.
Im not surprised. I have a toyota and I find their customer service excellent 🙂
The separate address Susan referred to is used for customers who have actuarial or rule of 78 loans. Additionally,it can be used for customers who don’t understand that the additional funds are automatically applied to principal….because it appears like their loan is paid ahead. Like you, I have a loan with TFS and I’m happy with their service.
My car loan is through Wells Fargo, and they apply any extra I send with my car payment to the principal. So even if I send 5 dollars or 5 cents, it is applied to the principal. One day I will be able to apply more than just a few dollars at a time.
@Beks Actually, no, it was not the same as the payoff address. It’s probably more what @Jewel was referring too. I don’t have the loan paperwork handy so I can’t confirm but I do know that when I asked about paying toward the principal (without mentioning advancing payment dates or anything like that) they directed me to the other address.
I’m still a bit confused though … every car loan I’ve ever seen won’t let you pay it off for less money, by applying money to the principal. So if you pay extra, sure you pay it off faster, but you don’t save money on interest like you do with a mortgage.
fyi- for future, if you have excellent credit look for alternate funding sources. tough in this economy but some may still be there. i used a place called firstagain to finance my car in 2008. they weren’t taking new loans the last time i checked (2009) but it was soooo much easier than haggling with the car company and then getting a loan through the car co. as well. that’s just one more way for them to sucker you and confuse you on costs. if they’re not financing it you get a straight number and work from there- don’t trade in either (unless you know what you’re doing) – takes all the power from them. i realized the last time i got a car loan through a car company that i may not have gotten the best deal and felt my hands were tied much more than i wanted them to be. firstagain was easy though and i paid off early with no hassles at all. whereas with honda i recall that i couldn’t pay off early without penalties….but always run the numbers first for either type of loan to see which is best. at least on honda i had 0% financing (thanks mom!) so it wasn’t too bad to just pay each month.
and..sorry so wordy, but i just started reading your blog minutes ago (due to inability to sleep worrying about company debt) and realized credit scores may be an issue- but i would still look for alternate funding in future (you never know..) and if you’re paying down debts and still using credit, your scores should be improving currently. always worth comparing when it’s people/companies taking your hard-earned money.