Principal vs. Prepaying, Our Debt Snowball and How Wachovia Stole $8.03

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As you may be aware my wife and I are working on our debt snowball and we all we have left is our VW and our mortgage, woot!   Above is our current progress not including the mortgage.  Incidentally if you’d like to be able to graph your own debt snowball or anything else for web use I have a write-up on Graphing your Debt Snowball with the Google Chart API.  Since we’ve taken care of our other debt obligations, those payments added up are making a sizable dent in the car payments, or so I thought. Our car loan is through Wachovia Dealer Services and they have taken it upon themselves to go ahead and apply those extra payments not to the principal owed on our car but rather towards the future payments due on the loan itself. I’m currently paid up past December with only a slight notch down in the principal. To say this angers me is the understatement of the year. Upon talking to one of their representatives (who honestly was very courteous) I learned that any extra payment must be labelled as principal only otherwise it will just be applied as a prepayment. Which explains why there online site would only allow me to make additional payments up to a certain amount. There is no option to pay principal only from the web, you have to mail payments in. So if I’m doing my math correctly that was 2 count them 2 payments of $573 that did not go towards my principal. So those extra payments should have taken my balance down $1146 but instead is just queued on my next payments. That means on the first month alone they’ll keep an extra $6.02 of interest on my 6.25% APR loan and roughly $2.01 from my next payment. That’s $8.03 they stole from me in interest. Of course I won’t take that I’ve already taken my normal payments and sent in directly to principal so they’ll only make a few extra cents on me.

This further cements why I need to be rid of these large interest sucking corporations that are mired in their own bureaucracy. Now did I have this same problem with my truck which I paid off 2 months ago? No. Why you ask? Because that loan was carried by my local credit union. They naturally assumed that if I paid extra on my truck that I would want to apply that to the principal. How about that. Also when I paid off my truck in full they sent me a congratulatory letter! Can you believe that, a banking institution that actually is happy for you to be free from a debt to them. Big props to the School Employees Credit Union of Washington, they are beyond awesome. If you are a resident of the great state of Washington and a teacher or a family member of a teacher or of a current member you can join.  Okay rant is over back to our normal scheduled programming.

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