Loan adjusted????

[Pandora]

I have a loan with Bank of America with a 60 month term. I, often, pay ahead which it is nice, I know I have wiggle room if needed and this works for me, I often pay things off in 1/2 the time of the terms, sending in extra money when I can.

Okay.... so I sent off a check for $1,000, according to my estimates, my loan should be paid ahead until September 2009. I was already paid ahead in payments from the last time I did this huge check deal, well, they decided to just go ahead, adjust my loan, making the next payment due the end of this month and applied everything on what I was paid ahead to the principle of my loan.

Odd, they have NEVER done things this way before. I have had various loans with Bank of America over the years, cars, campers, those sort of things and the only time they would apply a payment to principle was when I told them to do so.

So remind me again what this bail out did for us again?

 

[Tigerlily]

I believe that applying overpayments to your principle balance will save you more in the long run as you will pay less interest will pay it off earlier. I am sure you could request them to change it though.

 

[Baja28]

I believe that applying overpayments to your principle balance will save you more in the long run as you will pay less interest will pay it off earlier. I am sure you could request them to change it though.

Correct. If I make balloon payments, I require them to apply it all to principle.

 

[Pandora]

I believe that applying overpayments to your principle balance will save you more in the long run as you will pay less interest will pay it off earlier. I am sure you could request them to change it though.

I know I can request they make the adjustments and sure, applying overages to the principle saves *US* money but before, they were not willing to make those types of changes because it cost them money. Banks have seem to shift, and have done so AFTER the bail-out.

I have been reading that many credit card companies have already adjusted available credit to just a tad over the balances due, without any notification to the holders. Imagine how humiliating that would be thinking you have a a certain amount of available credit to buy a high ticketed priced item and later find you don't? I often use my credit card instead of writing a check just because..... I get little bonuses back from my credit card company in the form of gift cards to Amazon.

I have never had an overage go directly to principle on any loan before UNLESS I requested them to apply it to principle so this is, I believe, is a completely new practice and warning to those who do 'pay ahead' like I tend to do.

Banks no longer want your interest???? :shrug:

 

[Baja28]

I have never had an overage go directly to principle on any loan before UNLESS I requested them to apply it to principle so this is, I believe, is a completely new practice and warning to those who do 'pay ahead' like I tend to do.

Banks no longer want your interest???? :shrug:

They always did it automatically for me. I believe there may even be law at play that requires this but not sure.

 

[remaxrealtor]

They always did it automatically for me. I believe there may even be law at play that requires this but not sure.

Baja knows that I don't chat real estate on here openly, bad practice in my opinion. That said..it's not a bad idea to write the checks separately, with notation to apply the second check to your original note, great to keep a paper trail.

 

[DoWhat]

it's not a bad idea to write the checks separately, with notation to apply the second check to your original note, great to keep a paper trail.

Great advice.

 

[Chasey_Lane]

They always did it automatically for me. I believe there may even be law at play that requires this but not sure.

My credit union always applies my overages to principle and I never have to ask them to do it. I'm not sure why anyone would apply the extra to interest.

 

[Chasey_Lane]

I have a loan with Bank of America with a 60 month term. I, often, pay ahead which it is nice, I know I have wiggle room if needed and this works for me, I often pay things off in 1/2 the time of the terms, sending in extra money when I can.

If you are paying extra one month, but don't pay for a few months, the interest accumulation is actually a lot more. At least for one of my loans, that's how it works. Might want to check into that.

 

[remaxrealtor]

Great advice.

Thanks...I've seen this applied and it can become quite a mess. Ten additional seconds to write that second check will save a world of problems later.

 

[Chasey_Lane]

Great advice.

Or one check and on the memo line write "extra to principle." :shrug:

 

[tygrace]

I know I can request they make the adjustments and sure, applying overages to the principle saves *US* money but before, they were not willing to make those types of changes because it cost them money. Banks have seem to shift, and have done so AFTER the bail-out.

I have been reading that many credit card companies have already adjusted available credit to just a tad over the balances due, without any notification to the holders. Imagine how humiliating that would be thinking you have a a certain amount of available credit to buy a high ticketed priced item and later find you don't? I often use my credit card instead of writing a check just because..... I get little bonuses back from my credit card company in the form of gift cards to Amazon.

I have never had an overage go directly to principle on any loan before UNLESS I requested them to apply it to principle so this is, I believe, is a completely new practice and warning to those who do 'pay ahead' like I tend to do.

Banks no longer want your interest???? :shrug:

I have a Discover CC thru HSBC. My balance is @ $500, with a limit of $2500. They sent me a letter telling me they adjusted my limit to $700. In January, I applied for a new CC with HSBC, so I could get the deal with transferring a balance from another CC with a 0% rate. They issued me a new CC with a $4500 limit.

I called them after I received the letter, and asked why they did that. I've never been late, and I don't come near to maxing out my card.

What I got out of her explanation was that they are cutting available credit, because it lowers their outstanding balance--or something like that. It makes since to me, I just can't explain it correctly!!!!!!!

 

[mmesser0]

We have a Citi bank loan for 5 years. Just got a letter the other day stating that they have extended the term to 7 years, so we could make smaller payments. I could understand them doing this if we weren't making our normal payment, but we make an additional $50-$100 a month extra on top of the current due. Just another scam for them to get more interest money. We called them asap and told them to bring it back down to 5 years. One good thing though, our interest rate has come down 2 whole points since they got bailed out. Awesome

 

[Tilted]

I have a Discover CC thru HSBC. My balance is @ $500, with a limit of $2500. They sent me a letter telling me they adjusted my limit to $700. In January, I applied for a new CC with HSBC, so I could get the deal with transferring a balance from another CC with a 0% rate. They issued me a new CC with a $4500 limit.

I called them after I received the letter, and asked why they did that. I've never been late, and I don't come near to maxing out my card.

What I got out of her explanation was that they are cutting available credit, because it lowers their outstanding balance--or something like that. It makes since to me, I just can't explain it correctly!!!!!!!

This is happening a lot with credit cards. In fact, last month American Express started offering some customers $300, if they would pay off their balance and close their account.

A couple of things are going on.

(1) With rising unemployment and general economic uncertainty, they want to minimize their exposure in the unsecured credit markets. They are afraid that a significant number of people may lose their jobs and use their available credit limit to live off of for a while, without being able to pay it back. So, they are reducing this risk by cutting some limits down - even for people who are still making their payments, and haven't run up huge balances.

(2) From a technical standpoint, extended credit shows up on their books as a kind of liability, even if that credit isn't being used. So, the higher their consumer credit limits are, the more capital reserves they have to have available to cover it. With so many banks facing potential liquidity/reserve capital issues, they want to reduce the amount of capital reserves that they are required to hold - and they do this by reducing unused credit limits. Also, that allows them to extend more credit that is actually used, and on which they can collect interest.

 

[tygrace]

This is happening a lot with credit cards. In fact, last month American Express started offering some customers $300, if they would pay off their balance and close their account.

A couple of things are going on.

(1) With rising unemployment and general economic uncertainty, they want to minimize their exposure in the unsecured credit markets. They are afraid that a significant number of people may lose their jobs and use their available credit limit to live off of for a while, without being able to pay it back. So, they are reducing this risk by cutting some limits down - even for people who are still making their payments, and haven't run up huge balances.

(2) From a technical standpoint, extended credit shows up on their books as a kind of liability, even if that credit isn't being used. So, the higher their consumer credit limits are, the more capital reserves they have to have available to cover it. With so many banks facing potential liquidity/reserve capital issues, they want to reduce the amount of capital reserves that they are required to hold - and they do this by reducing unused credit limits. Also, that allows them to extend more credit that is actually used, and on which they can collect interest.

#2 is what I was trying to explain !!!! Thank you for the help Tilted.