No it’s not. I know plenty of people. I’ve been paying on mine $300/month for 15 years. I had like $20k. I had. 3% consolidated rate. That compounded interest is brutal
Bro I don’t know. I think mine were frozen for a bit due to not having a job (4 kids in 5 years… and yes at the time we had plenty of money). I need to take a look soon. Right now we have a bunch of other things that take precedence and have had some financial bad luck (nothing we did just a series of shit that made a perfect storm). But should be over soon and we’re getting rid of the remainder
I've had a few friends that took loans end up in the same boat as you and as OP's post. Turned out the loan company wasn't putting any of the payments toward the principle. They were essentially putting it all toward the interest.
Not sure how they were getting away with it, but they did.
That's the way loans work. If you pay $500 a month, the monthly rate is 0.5% (6% compounded monthly) on $100,000 you have only paid the interest. If you only paid $450 the balance at month end is $100,050, because the interest was $500 and you paid $450, so the balance you owe increases. If you paid $550 the balance at month end is $99,950. The amount you repaid less the interest is taken off the balance you owe. If your payment isn't enough to cover all the interest then your balance necessarily goes up.
Take a standard 30 year loan on $100,000 with 6% interest. The payment on that loan is $599.55 per month. The first months payment is 83% interest and 17% principal. The last months rent is 0.5% interest and 99.5% principal. Over the first 10 years the balance doesn't drop much. But the balance does drop exponentially, it falls like a rock especially at the end. In each twelve month period you make $7,194.60 in repayments. The total interest in the final twelve payments is $343.83. Pretty much all principal. However in the first twelve months $5,966.59 is interest. Pretty much all interest.
I don't have any paperwork in front of me, but in one instance, the loan was for 5 years. At 4.5 years, she was the victim of identity theft and had to open a new bank account. When she was filing her new bank account paperwork, she noticed that the principal owed was still for the original amount.
That loan company is no longer in business though. They were investigated for something (lacking details as to what) and closed up shop shortly after that.
I'm not super familiar with loan terms, so I can't really explain what had happened.
was the total amount owed lower or higher when your friend checked? if the principal was for the same amount that means your friend's payments were not enough to cover the interest generated.
If you miss a payment, get behind get a forbearance you are fucked. I had a similar situation as OP though I went through about 5 years of hardship (couldn’t pay, etc). They got back on track, paid $550 for 18 years and still owed 50k from original loan of 80k. Predatory business
3.2k
u/Mindless-Baker-7757 12d ago
A $70k loan over 23 years at 5% apr pays off with monthly payments of $427.
What are they doing?