I don’t really need to talk to a banker about this, im sure someone on the board can answer.
I took out a small personal loan. I will not receive monthly statements, instead i got a coupon book that ha a piece of paper i need to mail in every month with my check.
There is no early payment penalty, so i plan on making extra payments on it to pay it off early.
How will i know when it is paid off completely? Will i get a notice in the mail? Will the bank just stop cashing my checks?
When you are close to paying it off, they will probably notify you of the payoff balance a month or two out.
There internal payable systems should be setup to trigger some sort of notice when the balance gets down to something equal to, or less than, one or two month’s payment.
If you overpay, they cut you a check and close the loan and show as ‘paid in full’. They will likely issue a final statement, or confirmation letter.
My last car loan came with a book of “coupons,” exactly enough to cover the loan+interest. I never got a monthly statement. I was routinely overpaying the payments to try and maximally reduce the interest. Upon paying off the loan, I received in the mail a letter thanking me for my business along with a check for the amount I had overpaid(it was like $4.00).
So yes, you will be notified and refunded any amount you overpaid.
I had a car loan like this too. I think I got at least an annual statement, maybe even quarterly, but definitely not monthly. These days, I’ll bet you can probably find your loan info online too, so you can check at any time.
Nothing to add for an answer, but. . .
You probably already know this, but look out for the rule of 78s, which is pretty common. Basically, they frontload the interest in a way that shifts a lot more to the start of the loan than what a simple amortization would indicate. If that’s in effect, you might need to check your balance monthly to see how much it’s really going down.
Why not just call you bank to get the outstanding principal balance, if you can’t check on it online yourself? You will need that number for the last payment anyway.
If you have a coupon book and mail a check with the stated amount, they will credit it to that payment. So (probably) if you tear out a coupon at the back of the book and mail it it they will think "Thanks for making your April 2013 payment so early, oh by the way, you’re late on your April 2010 payment and we’ve added a $10 late fee. Also if you pay in coupons order but faster than they need to be paid, they (probably) will just credit your payments as received on time and you will pay off the loan faster making all the interest payments you would have made if you’d taken longer.
What you want to do if you want to pay faster and it’s possible on your loan is to make an extra payment that is designated to reduce the principle. This will lower your total cost. Your bank may or may not help you do this.
I have a related question. I have a 20-year simple interest loan with monthly payments of $478.88. My monthly statements show how much of the most recent payment was principal and how much was finance charge. These amounts seem to vary wildly back and forth from month to month (e.g. for the first few months, the finance charge portion was $256.50, $425.92, $279.64, $375.63, $302.40). Short of calling the 800 number on the statement (which I expect will be less than enlightening) is there any way of figuring out where they are coming up with these numbers?