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Home >> Lending >> Vehicle Loans
Bank Changes Payment from Principal to Interest
My car loan payments are $250 a month. One month I had extra money and paid an additional $250 toward the principal. When I checked my online statement, I noticed it moved my payment due amount back a month, so the next month, I went in to the bank early and made another $250 principal only payment, since the loan wasn't due yet. This went on several months, and one time the teller told me they would have to email someone in the loan department to make the principal only payment because a glitch in their system was changing the payment due date. The last payment I made on the principal was instead taken as interest only, and a note that I had back interest to pay because of their error. Am I responsible for their miscalculation on the interest, and can they change my request from principal only to interest only?
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 Your loan agreement should require that you pay monthly and that the bank collect interest owed before principal. We have seen banks allow payment dates to be advanced, and we have seen principal payments not advance the due date. The bottom line is that they properly amortize your payments. You can ask that they show you how each payment was applied, and what interest was owed and collected. Assuming your loan is simple interest, you can see what the principal owed was, and what the daily interest accrual was until the next payment. You may find an amortization program on the web as well, but you have to understand your rate and accrual method to be accurate.
At the end of the day, the bank should collect the interest that was owed under the terms of your contract and the schedule on which you have paid your loan. If you question what they've collected, ask them to explain it to you.
Published on BankingQuestions.com 5/12/10
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