[GroundLoop]

We have a 3 year loan through BMW. If you pay extra each month does that lower the amount of interest you owe. I ask this because I made an extra $2000 payment a few months ago and the next month it said no payment was due. And I saw that in order to pay the loan off you are supposed to ask for a pay off letter.

For contrast our home loan always requires the monthly principal to be paid and if you pay extra you can actually see the amount of interest owed go down by a higher amount than if you had just made the monthly principal.

[leo923]

every finance institution seems to be different. most car financing seem to not allow extra principal payments as they want to get all the interest possible unless you pay it off. i can also pay extra to principal on my mortgage also but not my car

[tejus]

Anything you pay extra goes to the principal amount and the interest goes down. You can see in the BMWFS account dashboard clearly what the interest paid, the principal paid and the amount you owe

[GerryC]

Originally Posted by GroundLoop

We have a 3 year loan through BMW. If you pay extra each month does that lower the amount of interest you owe. I ask this because I made an extra $2000 payment a few months ago and the next month it said no payment was due. And I saw that in order to pay the loan off you are supposed to ask for a pay off letter.

For contrast our home loan always requires the monthly principal to be paid and if you pay extra you can actually see the amount of interest owed go down by a higher amount than if you had just made the monthly principal.

You can pay ahead on your BMWFS account. It does save you interest as it is computed against the outstanding balance each month. They just give you the option of skipping payment if you are ahead on payments. Unless it was an emergency, I wouldn't do it as it defeats the purpose of paying ahead.

You can request an updated amortization schedule from BMWFS. Here's the intro:

Thank you for contacting BMW Financial Services regarding your account. We are happy to be of assistance.

Enclosed is a copy of the amortization schedule for your account. It reflects each payment you have made to your account, and the application to interest as well as the principal balance. Your retail installment contract (financing agreement) functions as a simple interest account, which is detailed for you in Section One on the back of your financing agreement. The per diem (daily rate) of interest that accrues is calculated as a daily rate, and is based on your remaining principal balance and annual percentage rate on your financing agreement. Therefore, as your principal balance decreases, the per diem of interest that accrues also decreases. Based on the description of the way your financing agreement functions, when we receive a payment for your account, it is first credited to the accrued daily interest since your last payment was made, and then to the remaining principal balance.