Friday I spent some time doing battle about the truck note (auto loan for non-Southerners) but not with hubby: Hubby is now completely sold on the idea of paying that note off. No, I was battling with hubby’s credit union, the noteholders.
We’ve been paying extra, AKA the “debt snowball” method, and for some strange reason they have been applying the extra as advance payments. The main problem with this is the note is drawn up to not be allowed to be more than 90 days ahead of schedule, so twice now they have moved our due date “so proper amounts of principle and interest can be applied to the loan,” according to the letters they sent. My interpretation: “We don’t like you paying extra because that reduces the amount of interest we can make off of you.” I would expect this kind of behavior from a bank, not a credit union!
So I got onto their web-based live chat help on Friday trying to find out how to get our extra payments applied towards principle instead of being counted as paying ahead. The first customer service rep had me really going: she kept contradicting herself, and after about 45 minutes I finally got transferred to another rep who made sense and didn’t sound like she was just repeating things in a script. Meanwhile I was talking to hubby on the phone to let him know what was going on.
The short version of the answer is we need to mark extra payments as “for principle only” because their computer system doesn’t have the sense programmed into it to recognize that extra payments should automatically go towards principle instead of being applied towards the next payment. She was also kind enough to send a note to the payment processing department so they notated the current extra payment as “for principle only.” I am happy to report it actually happened that way!
I guess the moral of this little chat and phone-based adventure is that they are just not used to handling someone who wants to pay a note down as quick as possible. My theory is they are used to people paying LATE or letting the truck note go on and on and on forever - or at least for all 60 months as it was originally drawn up. So our case has pointed out a little glitch in their program: how it really handles extra payments versus how it *should* handle extra payments. I can guarantee y’all I will take great pains to include in all capital letters in the memo field of my checks “FOR PRINCIPLE ONLY” from now on!
Those of y’all who are making extra payments on vehicle notes should probably take a close look at just how those extra payments are being broken down: Are they going 100% towards principle, or is their computer program advancing your due date and still charging interest?