Lump Sum Loan Payment

[Aharon]

Hi,

I currently have a car loan with MFC. I may be able to obtain a relative large sum of money (60% of O/S amount). If I pump this into the car loan, would I be able to renegotiate the loan to a lower premium over the same period outstanding (about 68 months) or would it simply reduce the payment term.

I would prefer to reduce my payment over the same term.

Thanks
Aharon

 

[UnUnOctium]

Hi,

I currently have a car loan with MFC. I may be able to obtain a relative large sum of money (60% of O/S amount). If I pump this into the car loan, would I be able to renegotiate the loan to a lower premium over the same period outstanding (about 68 months) or would it simply reduce the payment term.

I would prefer to reduce my payment over the same term.

Thanks
Aharon

Unlikely since you pumping more than the minimum means a loss for the lender. They won't want to lose twice.

 

[Aharon]

Actually the bank would be gaining if I kept the term the same - longer term to pay interest.

 

[killadoob]

I cannot recall how it worked but i phoned the bank when i had enough cash to pay off my car and asked them for settlement figure. They gave me a figure and i paid off the car. Perhaps wait until you can settle the debt.

I must be honest i never looked at how much they charged me to settle the debt, i just wanted shot of the installments.

 

[UnUnOctium]

Actually the bank would be gaining if I kept the term the same - longer term to pay interest.

The amount outstanding will be lower. i.e. same compounding interest on lower amount = lower total interest.

 

[Aharon]

The amount outstanding will be lower. i.e. same compounding interest on lower amount = lower total interest.

Yes, but they would be gaining by me keeping the peiod of the loan as long as before. They would then get compund interest on the o/s balance for almost 6 years as opposed to maybe two years if I continue paying the full repayment. It would be to the banks advantage to extend the loan as long as possible, whatever the amount o/s

 

[rorz0r]

I think the default is to reduce the payment and keep the same term. Call them though.

 

[phiber]

Depends, if you have a loan then paying it off sooner, or paying more in now can reduce your payment on what you owe. If you have a Higher Purchase, it probably wont make a difference, unless they are willing to renegotiate.