Toyota Financial Question - Explain this to me

how many months was your $372.55?

 

I mean how many months were you suppose to pay $372 on the loan?

 

So how are you not understanding your principal is reducing? Your set duration of the loan stays the same, so your monthly payment has to decrease because your principal is now less than before

 

It's safe to say I've had very few loans LOL

found this online....you need step #4

Step #1
Calculate the monthly interest rate. Determine how the lender is compounding the interest on your loan (listed on your loan documents). Divide the annual interest rate by 1200, to determine the monthly interest rate. For example, if your interest rate is 10 percent, divide 10 by 1200, which equals 0.008.

Step #2
Deduct the down payment. Subtract any down payment from the original price of the car. Be sure to add any fees, such as registration, to the original price before subtracting the down payment. This is your original principal amount of the loan.

Step #3
Determine the principal amount. Multiply the principal amount in step #2 by the monthly interest calculated in step #1. Deduct this amount from your monthly payment. This is the principal portion applied to the car loan. This changes each month. At the beginning of the loan, you will be paying more toward the interest portion of the loan than the principal amount. As the loan ages, the opposite will become true, paying more toward the principle amount and less toward the interest portion.

Step #4
Factor in any additional payments. If you pay more than the monthly car payment that is due, inform the lender that you want that applied to the principal amount and not the interest portion. This will accelerate the time it takes to pay off the car loan. If you do not inform the lender, most often the lender will apply it toward the interest portion of the loan, which does not save you money.

Step #5
Recalculate the principal. Calculate the extra principal amount paid in step #4 and multiply that number by the number of months paid. This will give you your new principal amount.

Step #6
Add it all up. Add the extra principal paid in step #5 and the regular principal amount in step #3. This is the total principal amount paid. Deduct this from your original car loan amount, and you will have determined the balance left on the loan. Be aware that this is not the total you will owe the lender, since interest will still accumulate until the loan is completely paid. However, this will determine the amount due if you were to pay the loan off in full at the time.

 

Every car loan I've had where I've done this has behaved the same way. Just keep paying the same amount your are (or increase it) and at the end it will "pay off" so to speak. Your principal is reducing at a faster rate than the structured table.

 

If you pay the new lower payment that shows up on the next bill, then you're back on track to paying the full amount of interest for the full term of the loan. Credit cards do a similar thing if you pay off a big chunk of the principal, they will respond with a "skip the next payment" or a "the next payment is on us" etc to gain more interest.

Folks, Toyota Financial nor any other loan institution is NOT your friend.

 

Could they simple be taking the extra you pay and applying it to the next months payment. Which would be just applying it to the interest in the end.
First month is $372.55 and pay $400. Was the next month's payment $345.10?

 

You have to call them either just prior to or just after making your payment (prob better just after making you payment that has extra money in it) and tell them that you want to make your regular payment and that you want the rest to go onto PRINCIPAL ONLY. And then log in and make sure it gets done.

Some financial institutions have a "memo" box when paying online to make specific requests but most do not and request you call in any specifics.

I have to call in or go into a branch of my credit union to make any payment over the base amount IF I want it to go towards PRINCIPAL ONLY on my line of credit acct, actually the same goes for my Sheffield acct for my bike.... Except Toyota financial and Sheffield do no have branches so you have to call in the request...

OR send in a check and write FOR PRINCIPAL ONLY on it...

Some people only send in checks and do not do the online thing so another option is to send two checks, one for the regular payment and one for principal only and specify as such on the check as stated above.

If I simply pay more each month the same will occure as you have described and my next months bill will be less but it will not all go to principal, some will go to interest and not all to principal kinda defeating the purpose.

Another thing you can do to make things slightly easier is to just set aside money each month and every few months or so put down a lump sum as principal only, say like an extra full payment..


I should have asked but I assume you have an interest loan and not one of the Toyota 0% deals as you bought your car used.

If we were talking a 0% for 60 month deal than anything extra paid on your monthly will automatically go towards principal because there is no interest involved.

I have the 0.9% for 60 (bought my 2015 persona a few days before they started offering 0% for 60 on all Prius) so I am technically in an interest loan. Although very low...

Hope this helps.




To reiterate, make your payment plus whatever extra you feel comfortable paying and then immediately call in and ask for the extra to go to principal only..

 

if you keep paing $400., pretty soon, you'll be down to zero.

 

Step #4
Factor in any additional payments. If you pay more than the monthly car payment that is due, inform the lender that you want that applied to the principal amount and not the interest portion. This will accelerate the time it takes to pay off the car loan. If you do not inform the lender, most often the lender will apply it toward the interest portion of the loan, which does not save you money.

Key word: Inform.

If the OP has a 0.0 loan, then there's no issue.
If not?
Then it's probably Toyota being Toyota again.

Many auto companies have a 0.0-percent 'teaser rate' that they offer in lieu of a full cash back discount.
If the real interest rate really is 0.0%, then it's not going to matter if you inform the lender where to place the extra payment portion because the interest portion is always going to be.......(you guessed it!)
Zero.

I always take the full cash discount.
I'm sure some math whiz out there can tell the class when it's more profitable to take this route, but my credit union is writing loans for about 1.3-% up to 36 months. (1.7% for 60 months) and I like things nice and simple.
I use the car company to buy a car from, I use the credit union to write the loan, and negotiate a cash, OTD price.

Here's why:
My CU automatically applies any extra payment that I make before the DD to the principle.
House, car, boat, signature, whatever.
I don't have to wonder about it, or make any special requests, or check any boxes.
You see.....there's a difference between being technically or legally honest, and being honestly honest.
I trust my credit union.
I do not, will not trust a car company's "financial company."

Good Luck!

 

And then they pay you?

 

yes! right out of john kenneth galbraith!

 

You are right, this is a different concept..

As don't most car loan contracts state, (i.e.. 60 monthly payments of $300 or something similar?)...Not if you make a payment and add a few bucks extra, your payment will go down in acoordance with? I always though it would come off of principal thus reducing number of total payments as well.. Lol.

If this is true then I am going to start adding some Extra to my monthly payment to Toyota financial as well. I put some money down when I bough the car to get a nice even number that I could afford but if I can get that number to go down a little each month by adding a bit to each payment with out having to do anything else then that's neat.

Just to confirm PriusGuy32, they said your payments will keep going down and will not revert back to the contracted payment? I guess what I'm asking is, the payment will not just be going down for the next month then bouncing back up to the original amount? You are right, confusing.. Haha!

 

You need to understand how amortization works to see why this makes sense. Most loans are amortized at a set interest rate over a set period of time. What TFS is doing is recalculating the monthly payment based on the fixed interest rate and the fixed number of payments. If you pay more than the monthly minimum, your principal is reduced. Banks recalculate the monthly payment due based on how much of the principal is left every month. If you pay the minimum due every month, your monthly payment stays constant, because it's following the amortization schedule for repayment. If you pay off principal early, your future monthly payments are recalculated so that the principal is paid off for the remaining term of the loan. In effect, a new amortization schedule is created, since the remaining principal is less than what was originally calculated. This new calculation re-amortizes the principal over the remaining period of the loan; this is why the minimum payment due is less. Remember that the loan is based on paying off the principal over a set period of time. The bank has no way of knowing how much you are going to pay every month, so it just calculates the monthly payment based on what the remaining principal is and when the contractual end date of the loan is. You will pay off your loan earlier by paying more than the monthly amount; but, TFS is telling you that if you pay the lower monthly minimum every month, the term (total number of payments) of your loan will stay the same.