Applying Payments to Principal - Honda America Financing

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Dan Albrich

Well-Known Member
So my intent, after I get my Oregon rebate and fed tax refund is to apply 100% directly to my loan. If anyone has tips on how best to do this I appreciate it.
i.e.
In an ideal world, there would be some way to apply 100% of the "over-payment" to principal and re amortize the loan. Meaning an option to instead of reducing the 5 years time of loan, to have the monthly payment go down.

I called them, the lady I spoke with wasn't terribly helpful. She didn't think re amortize/recast was an option and I'm not sure she understood what I was asking. She said if I over pay, the overpayment should automatically go to principal. But lets just say their rep sounded like she was guessing, and gave me no confidence she knew her stuff.

-Dan
 
Dan Albrich said:
So my intent, after I get my Oregon rebate and fed tax refund is to apply 100% directly to my loan. If anyone has tips on how best to do this I appreciate it.
i.e.
In an ideal world, there would be some way to apply 100% of the "over-payment" to principal and re amortize the loan. Meaning an option to instead of reducing the 5 years time of loan, to have the monthly payment go down.

I called them, the lady I spoke with wasn't terribly helpful. She didn't think re amortize/recast was an option and I'm not sure she understood what I was asking. She said if I over pay, the overpayment should automatically go to principal. But lets just say their rep sounded like she was guessing, and gave me no confidence she knew her stuff.

-Dan
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It's labeled very clearly as an extra principal payment on the website. The interest charges I've had over the past 8 months seem to be all over the place, though. I assume they're recalculating daily and it's varying by 28 29 30 31 day months and whether I wait an extra day to pay or not. It's the same amount every month, so unless you get a special deal it's not going to decrease over the five years, you'll just be done early. I will say their system is dumb. It sets the amount due to $0 after each full payment, so you can't make a normal payment on the first of each month manually. You have to wait until the second of the month for the amount due to reset and allow a normal payment.
 
Interesting to note, and I can afford the payment as-is of course, my preference to re-amortize makes Honda America more money. i.e. By not offering the option, the only option to early payment is early end to loan. They actually make less money this way. No biggy, but it's odd to me that they don't permit the payment to be applied either way.
 
I do payments from my bank to AHFC. I schedule them to pay every 4 weeks, and usually around $100 more than my payment (example - if my pmt is $380, I send $500 every 4 weeks.) Have never had any issues doing it this way.

After a year, I'm usually showing that I've made 14-15 payments based on the amount paid. YMMV.
 
Dan Albrich said:
So my intent, after I get my Oregon rebate and fed tax refund is to apply 100% directly to my loan. If anyone has tips on how best to do this I appreciate it.
i.e.
In an ideal world, there would be some way to apply 100% of the "over-payment" to principal and re amortize the loan. Meaning an option to instead of reducing the 5 years time of loan, to have the monthly payment go down.

I called them, the lady I spoke with wasn't terribly helpful. She didn't think re amortize/recast was an option and I'm not sure she understood what I was asking. She said if I over pay, the overpayment should automatically go to principal. But lets just say their rep sounded like she was guessing, and gave me no confidence she knew her stuff.

-Dan
Click to expand...

The Federal Tax Credit is just that - it will deduct up to $7500 from your current year's tax liability. If you only owe, for example, $2500 in Federal Tax, you can only have that amount as a Credit.

Note: I'm not an account or a tax advisor, just someone who is reading the fine print on this. :-)
 
I think the term you're looking for is "recasting" the loan (reamortizing the payments according to the actual current balance and number of periods remaining in the original term). Sometimes this can be done with a mortgage (often for a fee), but I don't believe it's generally available with car loans.

Depending on your interest rate and tolerance for risk, it might be better to invest the money (anything from a relatively safe high yield savings account or set of CDs to betting on the next Apple :-) and use the monthly proceeds of that to reduce your car payment or let them compound until you can pay off the whole balance early.
 
JCA said:
Depending on your interest rate and tolerance for risk, it might be better to invest the money
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This. There are several online banks offering >2% interest rates, and if you got the 1.9% loan rate, you're better off putting any extra in one of those savings accounts than paying down the loan early.
 
David in TN said:
The Federal Tax Credit is just that - it will deduct up to $7500 from your current year's tax liability. If you only owe, for example, $2500 in Federal Tax, you can only have that amount as a Credit.

Note: I'm not an account or a tax advisor, just someone who is reading the fine print on this. :)
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Note that the $7,500 is not refundable, but you don't need to owe anything when you file either. If you overwithheld during the year (so are getting a refund), but the tax due on your 1040 was over $7,500, you can get the money back.

Non-refundable means they wont pay you if you have no tax liability, but they will pay you back for the $$ you generously loaned them interest free.
petteyg359 said:
This. There are several online banks offering >2% interest rates, and if you got the 1.9% loan rate, you're better off putting any extra in one of those savings accounts than paying down the loan early.
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Or the 0.9 (which I got). You can put it into a 5 year CD paying >3%, or pay down a high interest loan you have (e.g., credit card, student loan), just make sure you account for secondary effects on taxes before you do that, as some loans (e.g., mortgage) are actually cheaper that their rate because you can deduct the interest
 
When rates were going down I was able to get my bank to revise the terms. I got a lower rate but extended the loan four months. I was still able to pay ahead. It’s worth asking, especially if you can find another competitive offer. Banks don ‘t want to lose the business and may be open to new terms.


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If you are getting 0.9apr offer, I wouldn't recommended pay it early. It's like free cash on table. Put the money in a savings account and get 2% interest easy.

For your original idea, the better way is to adjust your w4 now and get more take home wage. Purchase the car when you've saved $7500 and use as down.
As long as you don't underwithhold, there is no irs issue at all.

Sounds like you've purchased the car, then there is no way except refinance to do what you want. Overpay now, you still have to pay the same next month.
 
Dan Albrich said:
So my intent, after I get my Oregon rebate and fed tax refund is to apply 100% directly to my loan. If anyone has tips on how best to do this I appreciate it.
i.e.
In an ideal world, there would be some way to apply 100% of the "over-payment" to principal and re amortize the loan. Meaning an option to instead of reducing the 5 years time of loan, to have the monthly payment go down.

I called them, the lady I spoke with wasn't terribly helpful. She didn't think re amortize/recast was an option and I'm not sure she understood what I was asking. She said if I over pay, the overpayment should automatically go to principal. But just say their rep sounded like she was guessing, and gave me no confidence she knew her stuff.

-Dan
Click to expand...
I can tell you that I round my payment up each month and that my payment amount has gone down each month by about $3-$4. My next payment is $30 lower than my first payment in April.
 
I love these forums. Thank you all for such awesome replies. I especially like the idea to invest the money and simply make sure my return is more than 1%. I currently add $50/mo to every payment, just out of habit and do this with any loan.
I have to agree money lent at 0.9% is basically free money. My credit union (Oregon Community) offers 1.35% on checking so if I'm lazy I can leave the money in my checking and still get something better.

-Dan
 
Agreed, invest the rebate. The best thing you can do (aside from the additional principal you are paying) is number 1 on this website. Take your monthly payment and divide it by 2. Pay that amount every 2 weeks. Apply the extra monthly principal payment you been making to the first biweekly payment each month and watch the balance melt away. https://www.payoff.com/life/money/6-ways-to-pay-off-your-car-loan-early/


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