Principle Only Payments

[saildawg]

I was wondering why it is so difficult to arrange priciple only payments?  I assume the loan companies do not want us to pay loans off faster because that is less overall interest that they will make for the life of the loan.  We refinanced with DRB and it was sold to MOHELA/DRB.  I had to submit a formal letter with standing payment instructions.  This then had to be processed and approved.  This last month I made a $10,000 additional payment seperate from the usual 4k auto payment.  When I logged in today it states that $55 of the 10k went to interest.  The previous times I have done this $0 went to interest.  Probably not a big deal, but I just dont get why it is so difficult to make an principle only payment.  I guess more reason to pay them off early to end having to deal with these things.

Thanks

[Zaphod]

saildawg wrote:

I was wondering why it is so difficult to arrange priciple only payments?  I assume the loan companies do not want us to pay loans off faster because that is less overall interest that they will make for the life of the loan.  We refinanced with DRB and it was sold to MOHELA/DRB.  I had to submit a formal letter with standing payment instructions.  This then had to be processed and approved.  This last month I made a $10,000 additional payment seperate from the usual 4k auto payment.  When I logged in today it states that $55 of the 10k went to interest.  The previous times I have done this $0 went to interest.  Probably not a big deal, but I just dont get why it is so difficult to make an principle only payment.  I guess more reason to pay them off early to end having to deal with these things.

Thanks

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I havent had any difficulty with Mohela or their site, it runs easy and lets you choose an above principal amount to apply each month and that goes perfectly as expected. If on the other hand you pay random extra amounts, you have to account for daily accrual of interest which likely accounts for your 55$. Nothing sinister, just timing.

[Craigy]

While I was a customer of DRB I wrote them a couple few extra checks and it was no big deal.  Had to mail it, and it took over a week to post to the account but that's my only complaint.

If you read your note, it should read how additional payments are applied.  Often the language is something along the line of payment is applied to outstanding interest, if any, with the remainder to principal.  That's just how banking works.

Like Zaphod said, interest accrues daily so depending on when the check hits, there's some interest on your account.  If you make your next payment in full as scheduled, $55 or whatever that would have gone to that month's interest will instead go to principal.  You should be paying the same net amount regardless.

[IlliniGopher]

Mohela services my SoFi Loan and I can choose an additional payment amount that I can change freely, as long as it is at least 3 days before the due date.  When I want to make a large payment to principal, I always call in to the company and they can apply a principal only payment.  When I cross-reference it online, it initially is not entirely principal only (daily accrued interest shown), but then it corrects after a few days and they apply 100% of it to principal.  Hope this helps.

[GoodLife]

Yes, this exact scenario happened to us a few months ago.  Made an extra 10k payment to Sofi/Mohela, and $55 went to interest.  My husband called them (we had already called them a week earlier and written an email to have a "standing order" that all extra payments go directly to principle) and they said it would correct itself in a few days.  It did, and all 10k was applied to principle.

[CM]

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