Navy federal finance question

[helpmeout]

Is it true that navy federal doesn’t have an option to pay for the principal of loan as an option? They said once you get an auto loan through navy federal that it won’t let you just pay the principal when you put extra money towards it but that the extra payment will go towards the interest,

[MarvBear]

I apologize, but I cannot help with this question.   I am totally unfamiliar with NFCU other than what our search engine might reveal.

[hegemony]

18 hours ago, helpmeout said:

Is it true that navy federal doesn’t have an option to pay for the principal of loan as an option? They said once you get an auto loan through navy federal that it won’t let you just pay the principal when you put extra money towards it but that the extra payment will go towards the interest,

I would be surprised if a lender as large as Navy didn't allow prepay principal. Perhaps it just doesn't have the functionality on its website. Have you contacted customer service to inquire on how to make a principal only payment?

[helpmeout]

On 3/23/2023 at 9:02 AM, hegemony said:

I would be surprised if a lender as large as Navy didn't allow prepay principal. Perhaps it just doesn't have the functionality on its website. Have you contacted customer service to inquire on how to make a principal only payment?

I contacted them. 3 different people said the same thing that I can’t just pay the principal even if I made extra payments.

[hegemony]

1 hour ago, helpmeout said:

I contacted them. 3 different people said the same thing that I can’t just pay the principal even if I made extra payments.

wow. that is really disappointing to learn. Just another reason NFCU isn't as great as so many people claim.

[CreditSucksNot]

14 hours ago, hegemony said:

wow. that is really disappointing to learn.

 

And it isn't accurate at all.  I don't know how the OP phrased their question when they spoke to the reps but I am an NFCU member for over 30 years and I just called and asked.  The rep confirmed that ANY extra payment would go towards the principle on the loan.  SOME might go to interest depending on the amount of time since the most recent payment.  The rep I spoke to confirmed that if you do what I do on my mortgage and car loan which is pay extra each month that over the life of the loan LESS interest is paid as the principle is reduced first.  As long as a loan is active interest accrues daily.  That is why you get a "10 day payoff quote" and often get a check after the deal is completed for over payment the consumer has made when the interest is finally calculated down to the day.  The days of having to pay all the interest on a loan regardless of how soon you pay it off ended decades ago.  I don't know of any lender who is writing paper like that not even NFCU.

 

My mortgage is not with NFCU but I know that on the US Bank website each monthly payment I make outlines how the money was applied:  X amount to escrow, X amount to interest, and X amount to principle.  

[hegemony]

7 hours ago, CreditSucksNot said:

 

And it isn't accurate at all.  I don't know how the OP phrased their question when they spoke to the reps but I am an NFCU member for over 30 years and I just called and asked.  The rep confirmed that ANY extra payment would go towards the principle on the loan.  SOME might go to interest depending on the amount of time since the most recent payment.  The rep I spoke to confirmed that if you do what I do on my mortgage and car loan which is pay extra each month that over the life of the loan LESS interest is paid as the principle is reduced first.  As long as a loan is active interest accrues daily.  That is why you get a "10 day payoff quote" and often get a check after the deal is completed for over payment the consumer has made when the interest is finally calculated down to the day.  The days of having to pay all the interest on a loan regardless of how soon you pay it off ended decades ago.  I don't know of any lender who is writing paper like that not even NFCU.

 

My mortgage is not with NFCU but I know that on the US Bank website each monthly payment I make outlines how the money was applied:  X amount to escrow, X amount to interest, and X amount to principle.  

good to know! it did seem odd that such a mainstream CU would behave the way the OP described.

[dysonrichard801]

It is possible that Navy Federal Credit Union has certain restrictions on how extra payments are applied to an auto loan. It is best to consult with a representative from Navy Federal Credit Union to confirm their policies regarding extra payments towards an auto loan. They should be able to explain how extra payments are applied and provide options for paying down the principal of the loan.

[helpmeout]

this is what they said any extra payments will go towards interest and when the interest is paid then the portion of that extra payment will go towards the principal. 
 

where as, I have a loan with Toyota and I can either call in or apply the additional payment towards the principal only without having to pay the interest first. 

[MarvBear]

How does a simple interest auto loan work? Simple interest is relatively straightforward. Your outstanding principal balance is multiplied by the daily interest rate (your interest rate divided by 365) to calculate your interest payment.

 

What is so hard to understand about this?  You're making something much more complicated than it actually is.

[hdporter]

On 4/13/2023 at 10:19 AM, helpmeout said:

this is what they said any extra payments will go towards interest and when the interest is paid then the portion of that extra payment will go towards the principal. 
 

where as, I have a loan with Toyota and I can either call in or apply the additional payment towards the principal only without having to pay the interest first. 

 

And these are two paths that end up at the same destination with a near equivalent outcome.

 

With NFCU, if an extra payment arrives on the 5th day of your monthly payment cycle, the 5 days of interest that have accrued will be deducted from your payment, and the balance applied to principal.  When you make you next monthly payment on its due date, an additional 25 days of accrued interest will be deducted, and the balance applied to principal.

 

Toyota differs from this in a fairly minor respect:  You send the extra payment and its applied entirely to principal.  Follow with your monthly payment and 30 days of accrued interest will be deducted.   Daily interest accrued after the extra payment will be reduced, reflecting the balance reduction.

 

Both lenders are "simple interest" financing, meaning that finance charges are computed daily, based upon that day's balance.  The only difference is the timing of the interest deduction from payments (a very small difference).

[StarkRaven$]

Alliant CU allowed me to choose if I wanted an extra car payment to go 100% straight to principal too.