A Question About Finance

[Pho3nix]

Hi all,

So lets say I buy a car for R100k in Dec. No deposit. 12% Interest rate.
My understanding is your outstanding balance when you collect the car is the one with the interest already slotted in ala ~ R138408.21

Assuming I am correct, if I increase the debit order to from R2224.44 (Excluding Admin etc) to R3000, the term now becomes 3.5 years.

The questions :

* If I only pay the extra R775.56 for a year and request the installment return back to the original R2224.44 why does the term go back to 5 years?
* If I ask to return to the original term, shouldn't the amount paid already lower the installment?
* Better to just pay extra ad-hoc and not adjust the installment?

Thoughts?

 

[HavocXphere]

Nope. The outstanding balance will be current settlement value (more or less) which doesn't include future interest. The future interest isn't known anyway as its likely a floating rate.

As for paying extra - the various banks seem to handle this differently. Either term goes down or payments go down. Given a choice I'd suggest the term option is better though it limits you a bit in terms of the following:

>Better to just pay extra ad-hoc and not adjust the installment?

Yes, I'd keep it as ad-hoc...that way if you're tight on money in a month you're not forced to pay the extra. If you've got the discipline to always pay extra where you can that is.

 

[Pho3nix]

Dankie. Makes a lot of sense.

 

[A3@MBB]

On my SBSA statement the interest is already included in the "outstanding" balance.
When a interest hike kicks in, the balance adjust accordingly.
To get a settlement I would have to call to get a "correct" outstanding balance.

1. You signed for a fixed term and the bank keeps to the contract. (Read milk you as much as they can on interest)
2. Yes, instalment will be lower
3. Ask them to change the instalment. This way it is in your monthly budget already and hopefully you will get used to the odd R700 less a month and forget about it. And before you know it the car is paid off.

 

[Pho3nix]

On my SBSA statement the interest is already included in the "outstanding" balance.
When a interest hike kicks in, the balance adjust accordingly.
To get a settlement I would have to call to get a "correct" outstanding balance.

1. You signed for a fixed term and the bank keeps to the contract. (Read milk you as much as they can on interest)
2. Yes, instalment will be lower
3. Ask them to change the instalment. This way it is in your monthly budget already and hopefully you will get used to the odd R700 less a month and forget about it. And before you know it the car is paid off.

I'm with them as well which is why I asked the question.
Calculations I did on my end didn't make a lot of sense so figured I'd ask the wise ones of myBB.