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Experiment: Sneaky Bank?

August 4th, 2007 at 10:28 am

So, my home equity loan.

When I first started making extra payments a few months ago, the bills would show up for less than the monthly payment. Each month I owe them $405. I started paying $505, and the following month's bill said I owe them $305. I called them up and made sure that my extra $100 was being applied towards the principal. They said yes but since I was paying over...that I don't HAVE to pay in full the following month. What sneaks! I asked if they could break it down for me so I knew how much of my payment each month was going to interest vs. principal. They said no, because interest is added DAILY, and where my money goes depends on when I pay.

Um, WHAT??? That sucks.

So I started a spreadsheet, downloaded the history of the loan, and parsed it all out to determine how to beat their system. It's sneaky! Or I'm stupid and naive.

OK. So my bill is due on the 21st of each month. I get it in the mail 7-10 days before due date. Which is sneaky in itself, but I use my bank's bill pay. I'll suck it up. BUT...this is what I found:

Money Arrives on the 18th (3 days before due): $312 to Interest, $93 to principal!

Money Arrives on the 1st (20 days before due): $105 to Interest, $300 to principal!

So I already paid this month's (with the standard extra payment), but now I want to send a separate EXTRA $100. How much you wanna bet that they'll still pull their portion of the interest out before applying the rest to my balance? Even though I already paid this month's allotment.


8 Responses to “Experiment: Sneaky Bank?”

  1. terri77 Says:

    That's very sneaky. When I was in school the lady from the student aid office came in and told us all the underhanded things that they could to watch out for. Luckily my credit union lists about 5 or 6 different things that you're sending in your payment for. So I can choose to prepay interest or principal, or prepay next month's mortgage payment, or a few other options. It makes it very easy and upfront. When I sent in extra principal payments to Sallie Mae I sent a letter with the check specifying that it was for the principal payment.

  2. Ima saver Says:

    Yes, it is sneaky. That is why when I finance land, I keep my loan at the local bank. Every month, I went in with my regular payment with a seperate check for the principal payment only. Then I asked them for a print out sheet. I kept records of it down to the penny!

  3. Frayed Buckeye Card Says:

    Ima has it right,you must send in a separate check designated principal only.

  4. scfr Says:

  5. scfr Says:

    Yes, absolutely, the extra payments must be mailed in separately, and labelled "For Principal Only." And you may as well send in a separate letter with the payment reiterating that the payment is for principal only.
    Keep copies of everything!

    Regarding how much of each payment is going to principal and how much to interest, while they can't tell you about future payments, there is absolutely no reason or excuse why they can't tell you immediately after the payment has posted.

    Back when we had a mortgage, we were able to check that out by calling in or checking on-line after each payment posted, and it was a great motivator to see the percentage going to interest declining. [We had a good and honest mortgage company ... We never found anything out-of-line and they never tried to hide anything from us.]

    If they won't disclose that information to you, you may want to look in to having a mortgage audit done.

  6. frugalhousewife Says:

    Very sneaky, indeed! I guess I can add that to my growing list of reasons to get out of and stay out of debt.

  7. LuckyRobin Says:

    This is why my mortgage is through a credit union. I don't trust big banks to have anything to do with my house.

  8. Amber Says:

    Very sneaky, I just had a whamp bam with BoA. I was told all my extra payments (auto loan) will be applied to my principal (yeah right )they applied it to the interest. I will refinance in a couple of months with my credit union. Like who would want to pay the interest first. I am sure they will pull out their portion first. I just mailed another check and wrote on it to apply to the principal, I am waiting to see what happens...good luck

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