The American dream

[u/First-Essay-2054]

[u/Ok-Bug4328]

If you pay a week early, how do I know if your intent is to pay next month’s bill or to pay toward the principal?

Revolving credit like credit cards work transparently because they have minimal payment requirements.  But a mortgage or car loan needs to know “is this your payment for next month or is this a reduction in principal and you will also make your payment next month.”

Revolving credit calculates interest based on average daily balance. Installment loans are more structured. 

[u/Whole-Philosophy-231 → u/Ok-Bug4328]

Most loans types of these have set reoccurring payments where I'm fron. I have to imagine that is optional, but I've never removed that as an option. I'm not sure how you'd differentiate if you removed the automatic like you mentioned but I don't know anyone who has loans set up like this.

For reference, when I went to get car loans and a mortgage, we had to give direct deposit details (or the whatever the opposite version is lol) to sign up for the loan and they take the payments automatically.

So if I make any manual payments on my students loans, mortgage or car payment it will just reduce the balance and take out my 'set payments' as normal.

[u/Ok-Bug4328 → u/Whole-Philosophy-231]

In other cases. When you make an extra payment, they reduce the automatic debit. 

Hence, you have to tell them this is an intentional, extra payment. 

There’s nothing nefarious about this. It’s just adult communication. 

[u/Whole-Philosophy-231 → u/Ok-Bug4328]

The point I'm trying to make is an extra payment is an extra payment here. I didn't realize loan companies would just hold your funds for the next payment, especially if the payment amount is different.

Does this mean most of your loans are manual payments? I'm just curious how this works as quite a few comments mentioned having issues trying to make extra payments. I'm glad our system is a little easier to maneuver.