About a year ago, I (stupidly) financed my first vehicle. Due to my (again, stupidly) high credit utilization and young credit history, I of course didn't have a ton of options. I was impatient and ignorant (namely in terms of financial decisions and consequences) and bought the first vehicle I was approved for on day one. It was a $13k vehicle that I only had a $2.5k downpayment for at a sleazy "100% guaranteed approval" dealership. The salesman as you could imagine — especially with an eager young man — was very convincing and assured me that this loan at 25% may sound bad (and at the time I really had no idea how absurd it was), but I could simply make extra payments on the loan and/or refinance at a later time to avoid paying the over $5k in interest. Well I've recently started better organizing my finances, learning about preparing for the future, investing, saving, staying out of debt, etc. and with my newfound knowledge — in large part thanks to r/personalfinance — I've decided to look over my loan agreement, essentially for the first time. Here is where I discovered they really got me, even more so than I already thought. Under the prepayment section, I found and learned about the 'Rule of 78s' applied to this loan. I did some research and I understand the gist of it, but I'm still slightly confused. The majority of the results talked about how not only is early payment futile, but you'd actually pay more in the end. That's where I'm thrown. Are they just meaning in comparison to a simple interest loan? Or will I actually incur fees of some sort for early payment? If I paid the entire loan amount now (I'm only on monthly payment number 11 out of 42 of ~$415), would I not save on the remaining months' interest (although understandably a significantly less amount of interest on the remaining payments)? I've typed way more than intended, and I guess my main question I'm trying to get at is: is there anything that can be done about this type of loan to get me out of paying that insane amount of interest? Any form of 'refinancing' this type of precomputed loan?
TL;DR: In a moment of young, ignorant weakness, I financed a $13k vehicle @ 25% interest via a precomputed 'Rule of 78s' loan. I'm on payment 11 of 42, paying over $400 a month. I just want to know if there is any beneficial way of getting rid of this loan early or any type of refinancing options available; or am I going to have to eat it and learn from this valuable life lesson?
Submitted January 26, 2017 at 07:40PM by duoop http://ift.tt/2juZgUI
