Is it right for an auto financing company to charge interest on a monthly basis without adjusting interest charges for bi-monthly payments?
Asked by
Garebo (
3190
)
September 25th, 2010
As a convenience to pay bi-monthly, I see they still charge usury as if it was a monthly payment.
I think they should adjust accordingly-they see otherwise, obviously, there is no advantage besides convenience and more interest or money for the financial institution, or more to squander on derivatives.
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6 Answers
I see your “moral” argument but think that the legal answer is it depends on what the contract you signed says. I’m not a lawyer, and perhaps someone who is will chine in, but I think that if the contract sets those terms, then it’s legal.
Like @ETpro I am not a lawyer but I think he’s right. I believe the terms are set by the contract you signed with the finance company and unless the contract violates the laws regarding interest in your state, or violates federal law then it’s legal.
The advantage of paying bi-monthly is that every 12 months you have made an extra payment, and that will pay off your contract faster – thereby giving you a large savings in interest you won’t pay.
Oh wait – I’m confusing every two week payments with bi-monthly. Never mind.
Damn, you make me feel stupid-no wonder you have feathers.
On loans, you are charged an APR – that’s Annual Percentage Rate. The compounding is generally done on a daily basis. The advantage of making a payment every two weeks is that you reduce the outstanding principal faster – every two weeks, money from the payment reduces principal faster. The amount that the interest is being compounded on reduces faster, and you are saving money by making a payment every two weeks.
It has nothing to do with the rate itself. The bank makes less money on your loan when you pay every two weeks.
My answer is not directly aimed at your question, but it’s an important point to remember, when purchasing an automobile.
My friend was about to sign a contract for a new Ford Pickup truck. while reading the contract and the small print, my friend questioned an entry on the contract, which stated Talent Fee $500.00. my friend questioned this entry and was told this fee helps to pay for their television commericals. my friend saw red and tore the contract into pieces and left.
You really have to be careful and read the small print in contracts, especially when it involves purchasing an automobile.
Maybe, this is why car salesmen are not trusted.
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