Car loan

[Andrew001]

Hi folks

So I have a car loan and have noticed I have mainly been paying of just interest over the past few months ie. Not paying off the car itself. The loan is through absa. Is there anyway to avoid this or have it restructured?

 

[scudsucker]

That is how all loans work.

 

[The_Ogre]

Yes, pay more!

 

[Big Rat]

you pay R1000. Interest comes in and takes R950.
You pay R1000 again. Interest comes in and take R925.

Every month interest is calculated on what is left, everymonth that gets a bitt less, so every momht you pay off just that bit more on the loan itself.
There is no restructuring of that. It is normal basic money and interest.

 

[Andrew001]

thanks for the replies.
hmm.....
I was thinking of paying it off early next year, the whole thing in one go but i guess there is no point if by then the interest is already paid off??

 

[supersunbird]

thanks for the replies.
hmm.....
I was thinking of paying it off early next year, the whole thing in one go but i guess there is no point if by then the interest is already paid off??

I was with ABSA too and they do show it nicely, most other finance companies don't.

Now lets say you are paying R2000pm,

The first installment it will be like R1950 interest and R50 capital.
Month 36 will be R1000 interest and R1000 capital.
Month 72 the last installment will be R50 interest and R1950 capital.

The numbers above are just for illustration purposes.

If you deposit a large sum in and keep the installment the same (R2000pm) then the repayment period will shorten, or if you keep the repayment term the same, the amount you pay monthly will lessen.

 

[UrBaN963]

Pay it off as soon as you can, paying additional monthly if you can. The interest is calculated based on the remaining capital outstanding. If you pay additional funds each month, that goes directly to reducing the capital, thus reducing the interest and ultimately the amount paid back/payment term depending on your bank.

 

[Andrew001]

ahh! Get it, thanks for the help! Literally going to save me some extra cash

 

[Andrew001]

BTW is it common to perhaps do a refinance on the loan? Right now Im paying about 13%. Gather when my credit score improves (i lived overseas for many years) i could qualify for a lower rate?

 

[RedViking]

Sell the vehicle and buy something you can afford?

 

[supersunbird]

BTW is it common to perhaps do a refinance on the loan? Right now Im paying about 13%. Gather when my credit score improves (i lived overseas for many years) i could qualify for a lower rate?

Not common, and 13% isn't a very bad rate, especially if a first time financing buyer.

 

[Andrew001]

Sell the vehicle and buy something you can afford?

I can afford it