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Advice About High Interest Rate on Auto Loan - The Bills.com Blog
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Advice About High Interest Rate on Auto Loan
Friday, Oct 24, 2008
Question: I just bought a car and am getting charged 22.4% interest. What is the highest APR for a 2005 dodge truck in Texas? Also if I pay alot more down in December toward the principal of the loan will my payments go down? I don't know if they can charge interest before tha month comes around. On an $11700 loan they are charging me $5800. Is that $5800 now or over a period of 4 years. If I pay alot more now will that lower the amount of money I pay in interest?
In regard to the interest rate being charged on your auto loan (22.4%), I will say that rate is exceptionally high for any auto loan. To my understanding, Texas law generally caps the annual interest rate charged on used vehicles at 27%. Any interest charged above this legal amount is referred to as “usury,” though the maximum interest rate that can be charged under Texas law varies drastically depending on the amount and type of loan. In addition, there are
many exemptions to the Texas usury laws; for example, if the lender is a national banking association, it may be exempt from many state usury laws. Even if your lender is not exempt from the Texas usury laws, the 22.4% rate it is charging you is below the 27% limit set by state law, so your loan is probably within acceptable parameters. However, if you think that the lender misrepresented the interest rate, or if you feel that the interest rate is improper for any other reason, I would encourage you to consult with an attorney to discuss your rights and possible remedies in this situation.
Whether or not paying down the balance of the loan is a wise choice largely depends on the terms of the loan you signed. Some auto loans contain a “prepayment penalty,” which requires that you pay all or a portion of the anticipated finance charge if you decide to pay the loan off early. However, many loans do not contain a prepayment penalty, so you will need to carefully review the terms of your loan agreement to determine whether or not your loan contains such a clause. If your loan does not include a prepayment penalty, I would definitely encourage you to pay off the loan as soon as possible so you can reduce the total amount of interest you pay. Even if you find that your loan does have a prepayment penalty, it may still make sense to pay the loan off
Whether or not paying down the balance of the loan is a wise choice largely depends on the terms of the loan you signed. Some auto loans contain a “prepayment penalty,” which requires that you pay all or a portion of the anticipated finance charge if you decide to pay the loan off early. However, many loans do not contain a prepayment penalty, so you will need to carefully review the terms of your loan agreement to determine whether or not your loan contains such a clause. If your loan does not include a prepayment penalty, I would definitely encourage you to pay off the loan as soon as possible so you can reduce the total amount of interest you pay. Even if you find that your loan does have a prepayment penalty, it may still make sense to pay the loan off
early if the penalty is only a portion of the total finance charge. What action makes the most financial sense really depends on the terms of your individual loan, so you will need to review the loan and make a decision based on what you find.
Given the high interest rate you are currently being charged, you may want to consider refinancing your current auto loan to try to obtain a more favorable rate. Many banks will work with consumers to refinance their auto loans, providing them with much better terms than those offered by the original lender. I would encourage you to speak with various banks about the possibility of refinancing your current auto loan, at least to determine if refinancing is an option. Given the current problems in worldwide credit markets, obtaining a new loan may be difficult, especially if your credit history is less than perfect. That said, it never hurts to explore your options; you may find a much more affordable loan is available to you. To learn more about refinancing auto loans, I encourage you to visit the car loan refinance section of our website.
To read more about auto loans, you should visit the Bills.com Auto Loans page at http://www.bills.com/auto-loans/. I wish you the best of luck in finding a way to reduce the cost of your current car loan, and hope that the information I have provided helps you Find. Learn. Save.
Best,
Bill
www.bills.com/blog/
Given the high interest rate you are currently being charged, you may want to consider refinancing your current auto loan to try to obtain a more favorable rate. Many banks will work with consumers to refinance their auto loans, providing them with much better terms than those offered by the original lender. I would encourage you to speak with various banks about the possibility of refinancing your current auto loan, at least to determine if refinancing is an option. Given the current problems in worldwide credit markets, obtaining a new loan may be difficult, especially if your credit history is less than perfect. That said, it never hurts to explore your options; you may find a much more affordable loan is available to you. To learn more about refinancing auto loans, I encourage you to visit the car loan refinance section of our website.
To read more about auto loans, you should visit the Bills.com Auto Loans page at http://www.bills.com/auto-loans/. I wish you the best of luck in finding a way to reduce the cost of your current car loan, and hope that the information I have provided helps you Find. Learn. Save.
Best,
Bill
www.bills.com/blog/
Also, make sure to get a free financial health check-up with Bills IQ!
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1. Posted by Susan on Sunday 9th November 2008 23:59
I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.
2. Posted by Bill on Monday 10th November 2008 07:09
Thank you Susan. Please contribute as well so that we can help as many people get financially fit as possible in these challenging economic times.
3. Posted by Rashmi on Monday 16th March 2009 02:16
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6. Posted by Thanks. on Monday 16th March 2009 06:09
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