I had no idea this was possible, but I wanted to share my experience in case it helps someone else. My auto loan payment is $157 a month, but I usually pay between $160 and $200. Last month, I accidentally tried to make my payment using a canceled debit card, so it didn’t go through, and I didn’t notice. This month, I realized the payment hadn’t been processed and started panicking, thinking I’d get a 30-day late mark on my credit report. I called my credit union, and they told me that because I typically overpay, I had a credit balance on my account. This credit was applied, so even though no payment was made last month, I was still on track. This prevented any negative reporting to the credit bureaus and saved me from a collections issue.
You gain a lot from overpaying, my friend.
It’s similar to setting aside money for ourselves in case we make mistakes.
Be careful with that. Instead of considering any excess funds as credit against future payments, the majority of lending institutions will apply them to the principle. A better course of action would be to put aside enough additional cash to cover two months’ worth of expenses, then one month. You will then have a true sixty-day buffer.
As long as the next payment isn’t more than 30 days away, they will normally apply it to the next one. This implies you can overpay and be ahead by one month, but not by two; the remaining amount will go toward principal.
I think it’s best to overpay if you have the means to do so.
With mine, you simply write the destination of the funds on the pay stub. You pay more in fees by having it go to future payments than to the principle, but I’m 6 months ahead, so if something were to happen I have a nice buffer to get extra money set up.
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most, but not all of them. That’s good because my allows me to apply to whichever one I want.
It’s rather simple to determine because your amount payable decreases if the overpayment is carried over to the following billing cycle. You will soon receive statements stating that no payment is due if you overpay. With my automobile, I paid it off a few months ahead of schedule by doing this.
That’s not ideal. This implies that they are essentially paying the regular payments and keeping your money in some sort of escrow. Your excess payment isn’t being applied to the principal amount.
Even if I only round to the nearest $10, I still do this once a month. The amount paid is $324 + change. Since my lender allows me to apply toward either the principle or future payments, I typically just pay the principle. Still, it’s good to have the choice.