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Amortization Scheduled Payments

by Naim717
7 replies
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Does anyone know anything about Amortization Schedule Payments on a house or car. I am trying to pay off my car earlier but a smarter way.
#amortization #mortage #payments
  • Profile picture of the author Kay King
    There are tons of amortization tools online - look up one of them for car loan and another for mortgage and enter the numbers. Extra payments during the first half of the loan duration will save the maximum interest on the life of the loan. But that's "loan sense".
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  • Profile picture of the author seasoned
    Well, different companies have different ways, and restrictions, and that is ESPECIALLY true for cars. But IF it is properly amortized, and there are no penalties, and the excess is applied to current principle when paid, ANY amount will lower your principle by the excess, and that will reduce every monthly payment's interest by an amount equal to the interest on that additional principle. When the principle becomes less than the payment+principle that should be paid, that next payment would be reduced accordingly, and be your last payment.

    So what else is there to know, outside of maybe trying to make your last payment occur on a given day.

    BTW There ARE amortization calculators on the net, AND you can get books. But ask the people that handle YOUR account because they at least USED to do a LOT of tricks. MOST people, historically, have overpaid their car loans a LOT. It gets the car companies more money, and it is easier to figure it out. Most customers don't understand amortization, that is figured out with a COMPLICATED calculation, and the VERY SIMPLE calculation that car dealers have used seems to make sense until you realize that each payment makes each following payment LOWER! The reason why they APPEAR to be the same in amortized loans is because the additional payment goes towards paying down EXTRA principle. So the interest goes down quicker as payments are made, which is why the REAL formula is more complicated.

    Steve
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    • Profile picture of the author Naim717
      I was told the best way to make the amortization payments was to make your monthly payment and pay the interest from the following month. So I would pay my April payment amount w/ the May interest. Does it matter if I am off in the cents? Every calculator I have used to does not include the cents.
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      • Profile picture of the author seasoned
        Originally Posted by Naim717 View Post

        I was told the best way to make the amortization payments was to make your monthly payment and pay the interest from the following month. So I would pay my April payment amount w/ the May interest. Does it matter if I am off in the cents? Every calculator I have used to does not include the cents.
        So what are you trying to do exactly? There is NO magic here. The more you pay off in a given month, the lower your principle should be, and that should cause the future interest to be lower, which will cause even more to be paid to the principle. Of course NONE of that is an absolute given, and that is especially true with cars.

        With real estate loans, at least in many states, it is apparently illegal to actually figure these costs without a license of some kind, and there may be repercussions. So they are more careful. They make books that make this very simple, as they did all the hard work, and computers and financial calculators can do it also. Besides, you may be talking about millions of dollars paid over even 45 years. With car loans there aren't those kinds of laws, and the standard way of calculating at least USED to be like payments=cost/months cost=principle+(principle*int*year) So you have to really watch them. I have to wonder how many fell for this. I once went in to buy a car with my mother, and I kept telling the sales person his calculations were wrong. He kept lowering the payment, SAME terms, and even the bank's loan papers said the final value was correct.

        SO, with a $20,000 car at 4% for 5 years, cost=24000 payments=400 It SHOULD be more like: cost=22,100 payments=368.33 They would be charging you almost 4% more interest.

        HECK, the real estate industry, or really the banking industry, used to have a lot of tricks with prepayment penalties, etc.... One of the FEW things that the US government ever did right was to tell the banks OK, if you do that, we won't buy them! The government had various companies like FNMA(AKA Fannie Mae), and FHLMC(Freddie Mac), GNMA(Ginnie mae), and they bought mortgages and issued bonds. So banks started dropping a lot of those things, because they just wanted a quick profit. But all of these are for mortgages. I haven't heard of such a thing, with the government providing it and thus standardizing rules, for cars.

        WOW, there is a CAR bubble! WHO KNEW? Subprime Trading Like It

        Steve
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      • Profile picture of the author David Beroff
        Originally Posted by Naim717 View Post

        I was told the best way to make the amortization payments was to make your monthly payment and pay the interest from the following month. So I would pay my April payment amount w/ the May interest. Does it matter if I am off in the cents? Every calculator I have used to does not include the cents.
        "Best" depends on your finances. As others have said above, first read your loan contract to determine what the prepayment penalties are, if any. If there aren't any, then simply pick an additional amount, (again, what's right for you), and send it. Your loan company may require special notation, e.g., "extra $100 toward principal", or whatever, as per their instructions.
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  • Profile picture of the author agc
    in excel: (these values are for the payment on a 32000 car at 12% for 5 years, but you can also do a house, a boat, a credit card, anything fixed rate fixed amount loan)

    A B
    1 rate 12%
    2 years 5
    3 amount -32000
    4
    5 payment =PMT(B1/12, B2*12, B3)
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  • Profile picture of the author agc
    most car loans won't accept advance payments, or will apply them at their regularly scheduled time (ie not saving you any money).

    most mortgages will accept additional,but may have rules about hwo they are remitted. a few also have prepayment penalties (I can only prepay 20% per year on mine for the first 5 years).
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