what happens when you make payments higher than your quoted monthly payment and you eventually get to a negative payment for the month? to be more clear my monthly payment is around 400 and ive been paying 500 and now im at a negative balance. id like to keep paying 500 every single month, will i just build up a large negative payment/balance?

 

The "bank" will remove the amount of the loan payment each month as it is due until the point where the extra money you have been paying equals the pay-off of the car. Then you will OWN it!

 

it will just be treated like a prepayment for the following month payment. in other words, paying more will not reduce the principle/interest amount.

 

thanks, just wanted to make sure. i know with sprint (cellphone) if you keep a negative balance for too long, they send you a check for the accumulated overpay.

 

How your overpayment is applied depends on your loan agreement, which will define how overpayments are applied and any prepayment penalties. Here's an article that describes some different types of loan structures/penalties:

http://www.allthingsfrugal.com/auto.loan.penalties.htm

 

This would be a rule of 78's type loan (refer to
)
which seems fairly rare these days unless you are dealing with bottom feeder type we tote the note buy here pay here type places.

A rule of 78s or prepayment penalties are terrible for the consumer and no reputable finance company deals that way.....or they get a bad rep....and therby cease to be reputable.

I dont know the details of the OP's financing but I would be surprised if it were not simple intrest....someone who has done MINI financing would be able to speak to that

 

hmmm are all the mini financial loans, the ones done through BMW actually the same? mine seems to be of this variety "Yet another way to penalize prepayments is found in something called a 'pre-computed' loan. In that loan you agree to repay the total amount of interest plus the principal no matter how quickly you repay the loan. Again, it's not technically a penalty for prepaying, it's just a different type of loan. But the results are the same."

 

It is quite easy to ask MINI Financial Services.

http://ol.miniusa.com

 

Op, read YOUR loan agreement.

 

It seems as though it just sits there....I also pay more than my loan but it is just reflected in a negative balance and it doesn't seem to pay off the principle thus reducing total payments...Guess I'll have to give them a call.