Car finance question

joker08

Expert Member
Joined
Sep 4, 2018
Messages
1,317
My wife bought a second hand car on finance. Now we plan to pay more than the regular finance amount to save some interest.
My question is, how does excess payment help reduce the total loan amount.

Original Capital Balance : R 151,207.50
Instalment Amount : R 3,053.50
Outstanding Capital Balance : R 135,621.83
Actual Contract Balance : R 191,008.00
Payments Received : R 3,053.50
Interest : R 1,571.37
Fees Levied : R 69.00

My understanding is that if I make an excess payment it will reduce the "outstanding capital balance" which will consequently reduce the monthly interest. Am I right?
or will they still charge me according to the "Actual Contract Balance"
 

ToxicBunny

Oi! Leave me out of this...
Joined
Apr 8, 2006
Messages
94,185
My wife bought a second hand car on finance. Now we plan to pay more than the regular finance amount to save some interest.
My question is, how does excess payment help reduce the total loan amount.

Original Capital Balance : R 151,207.50
Instalment Amount : R 3,053.50
Outstanding Capital Balance : R 135,621.83
Actual Contract Balance : R 191,008.00
Payments Received : R 3,053.50
Interest : R 1,571.37
Fees Levied : R 69.00

My understanding is that if I make an excess payment it will reduce the "outstanding capital balance" which will consequently reduce the monthly interest. Am I right?
or will they still charge me according to the "Actual Contract Balance"

Your extra payments will decrease the outstanding capital balance. But you may have to just confirm that with the finance house.
 

PsYTraNc3

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Jan 4, 2012
Messages
3,274
My extra payments do not reduce the capital balance unless I send a request for deduction (Wesbank)

What happens instead is that the extra payments are added to an advanced amount and earns interest rebates.
Installment remains the same but the term will be reduced in this case.
 

joker08

Expert Member
Joined
Sep 4, 2018
Messages
1,317
My extra payments do not reduce the capital balance unless I send a request for deduction (Wesbank)
So say I make an extra one off payment of R5000(transfer from my savings account to the car finance account through the FNB app/website) and I call them, will they reduce the amount from the principal over the call? all there will be a whole other procedure?

What happens instead is that the extra payments are added to an advanced amount and earns interest rebates.
Installment remains the same but the term will be reduced in this case.
I dont understand "interest rebates " please elaborate.
 

PsYTraNc3

Expert Member
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Jan 4, 2012
Messages
3,274
So say I make an extra one off payment of R5000(transfer from my savings account to the car finance account through the FNB app/website) and I call them, will they reduce the amount from the principal over the call? all there will be a whole other procedure?
They will send you a form to complete and email back to them in order to process the reduction.
I was asked for proof of payment before when I did multiple transfers even though it shows as a payment on the statement.

I dont understand "interest rebates " please elaborate.
Let me first state that I am not a finance specialist, just commenting since making extra payments is something I do monthly.

You pay interest on the outstanding capital balance monthly and earn interest on the advanced amount.
The rebate from what I understand is what they owe you on the advanced amount.
 

SauRoNZA

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Jul 6, 2010
Messages
39,034
Interest is calculated daily on the outstanding capital balance.

Any excess you paid gets subtracted from that outstanding capital balance.

If it’s Wesbank you’ll see the interest charged normally as per contract and then another line item for the rebate on interest.
 

Pineapple Smurf

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Messages
30,236
i got nailed on my motorbike
cost was R100k and the day i signed the contract i was due for R130k in total
they slapped 5years of interest immediately onto my account
bastards
/spit

so trying to pay it off quicker wouldnt of worked for me
 

joker08

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Joined
Sep 4, 2018
Messages
1,317
Let me first state that I am not a finance specialist, just commenting since making extra payments is something I do monthly.
You pay interest on the outstanding capital balance monthly and earn interest on the advanced amount.
The rebate from what I understand is what they owe you on the advanced amount.
I understand bro.
Interest is calculated daily on the outstanding capital balance.
Any excess you paid gets subtracted from that outstanding capital balance.
If it’s Wesbank you’ll see the interest charged normally as per contract and then another line item for the rebate on interest.
So the rebate is calculated according to same interest rates they are charging on the outstanding capital or less ?
for example I pay 13% interest rate, so if I pay an excess is rebate calculated @13% or will belike 5-6% ?
 

Steamy Tom

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Jan 23, 2019
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7,004
i got nailed on my motorbike
cost was R100k and the day i signed the contract i was due for R130k in total
they slapped 5years of interest immediately onto my account
bastards
/spit

so trying to pay it off quicker wouldnt of worked for me

that is illegal... what bike did you buy and when?
 

Magnum

Expert Member
Joined
Mar 12, 2013
Messages
4,665
My wife bought a second hand car on finance. Now we plan to pay more than the regular finance amount to save some interest.
My question is, how does excess payment help reduce the total loan amount.

Original Capital Balance : R 151,207.50
Instalment Amount : R 3,053.50
Outstanding Capital Balance : R 135,621.83
Actual Contract Balance : R 191,008.00
Payments Received : R 3,053.50
Interest : R 1,571.37
Fees Levied : R 69.00

My understanding is that if I make an excess payment it will reduce the "outstanding capital balance" which will consequently reduce the monthly interest. Am I right?
or will they still charge me according to the "Actual Contract Balance"
2 options. reduce monthly installments or reduce the contract period.
 

Pineapple Smurf

Pineapple Beer Connoisseur
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Messages
30,236
that is illegal... what bike did you buy and when?
Honda NC750X DCT in 2015 from Honda Canal Walk (Cape Town)

Alphera Financial Services (BMW i believe but dont quote me) did my finance, i have 5 more payments and then Tsek Jou Naai !!!!!
 

SauRoNZA

Honorary Master
Joined
Jul 6, 2010
Messages
39,034
I understand bro.

So the rebate is calculated according to same interest rates they are charging on the outstanding capital or less ?
for example I pay 13% interest rate, so if I pay an excess is rebate calculated @13% or will belike 5-6% ?

Yes same interest rate.

It’s a rebate on interest not paid. Not a different interest.

Check the rebate, take off the admin fees and you’ll find it more or less accurate using a monthly calculator.

Also set your debit order statically for however much more you want to pay and don’t fall for the trap of doing it manually and then skipping out.

Don’t do the reduction of instalments, then you simply pay more of less the same interest overall and don’t win anything but a minor reduction.
 
Last edited:

ToxicBunny

Oi! Leave me out of this...
Joined
Apr 8, 2006
Messages
94,185
i got nailed on my motorbike
cost was R100k and the day i signed the contract i was due for R130k in total
they slapped 5years of interest immediately onto my account
bastards
/spit

so trying to pay it off quicker wouldnt of worked for me
Nah what they were doing is showing you the total contract value including interest for the term of the loan... You could have paid extra in and reduced the capital balance... Mfc do the same. I have two balances, outstanding contract and outstanding capital
 

Pineapple Smurf

Pineapple Beer Connoisseur
Joined
Aug 2, 2016
Messages
30,236
Nah what they were doing is showing you the total contract value including interest for the term of the loan... You could have paid extra in and reduced the capital balance... Mfc do the same. I have two balances, outstanding contract and outstanding capital
MOFOS
/spit
 

SauRoNZA

Honorary Master
Joined
Jul 6, 2010
Messages
39,034
So say I make an extra one off payment of R5000(transfer from my savings account to the car finance account through the FNB app/website) and I call them, will they reduce the amount from the principal over the call? all there will be a whole other procedure?
.

You don’t need to do anything.

If you owe R100,000 still and pay R5000 in and your interest rate is 10% it will look more or less like this.

“Normal” Interest : R 833.

Reduced Interest on 95,000 : R791.

Rebate is R833 - R791 = R42.
 

SauRoNZA

Honorary Master
Joined
Jul 6, 2010
Messages
39,034
i got nailed on my motorbike
cost was R100k and the day i signed the contract i was due for R130k in total
they slapped 5years of interest immediately onto my account
bastards
/spit

so trying to pay it off quicker wouldnt of worked for me

No, you just fundamentally misunderstood what you were looking at.

You can pay any loan off faster and score on interest.

The only caveat being that you can’t close up loans above a certain value within 2 years but I fail to remember what the value was now. I think it was in excess of 250k.
 

Lupus

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Joined
Apr 25, 2006
Messages
31,315
i got nailed on my motorbike
cost was R100k and the day i signed the contract i was due for R130k in total
they slapped 5years of interest immediately onto my account
bastards
/spit

so trying to pay it off quicker wouldnt of worked for me
But if you asked for a settlement amount it would've been lower than the 130k.
 
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