I’ve been paying on my car for 3 years and the amount has never changed. I just looked online to pay it today and the payment went up by $134! I cannot afford this AT ALL. So I’m panicking right now. I’ve never been late with a payment, never missed a payment. I can’t call them to figure this out until tomorrow, so I was hoping maybe somebody could let me know today… if this is common? How is it even legal? I haven’t been notified that there would be a change! When I purchased my car I picked a payment rate that I could exactly afford. My pay since then has gone up a little bit, and I could afford an extra $20 or $30 maybe… but **not **this kind of increase.
If I have to refinance to lower my payment, I will, but I’m going to be *extremely *unhappy if it increases the amount of time it takes to pay off the loan. It’s already a 5-year term. And I have no idea how refinancing works, anyway. Please help
I’ve never missed or been late with an insurance payment. I have automatic withdrawals set up through Progressive, and Geico before that. I DID just pass my 6 month term with Progressive, and they auto-renewed me, but I guess it’s possible a mistake was made.
Thanks for the idea, though, I’ll definitely ask them if that’s a factor when I call in the morning. It doesn’t say anything about added insurance on my lienholder’s website, but they don’t really itemize so it’s hard to say if that could be it.
Okay I looked at my payment history and there is an “MDI adjustment” listed for March 30th, at $993. I don’t know what this means. Google says MDI refers to “monthly disposable income.”
If this is insurance-related, there should be no reason for me to pay the increased amount, correct? Because I have been continuously insured, but maybe there was a booboo in reporting my carrier change. Whatever insurance they purchased (assuming they did so) would refund the premium to them based on duplicate coverage, right? I just provide them with a copy of my insurance card and Progressive phone number so they can figure out there was no lapse in coverage, and then I’m good? I’m hoping
First, is this a car you can afford? 3 years paying on a car seems like a long time to me. I’ve never gotten a loan for a car so I don’t know. My current POS was what I could afford cash. Had I been able to take out a loan at that time, I wouldn’t have wanted to do it for more than 24 months. It just feels wrong. So maybe that’s what you need to look at if fixing your car payment with a phone call doesn’t work.
Second, what are the original terms? Did something expire? Does escrow have anything to do with it? How much have you paid on the principal?
edit: It hopefully is just a blip in the insurance thing.
Length of car loan is no indication of whether or not someone can “afford” the car. With many lenders in the past few years offering car loans with 0.9%-1.99% it’s almost dumb to not finance a car.
It may not “feel that way”, but squirreling money away in a savings account earning 0.25% APY to slowly be able to afford to buy a car “cash” is actually a worse use of your money than just putting a 10-20% down payment on the car and financing it for 3+ years. Assuming you get a good rate like I mentioned above.
The reason it’s actually a bad move is you’ve taken money out of your monthly disposable income, money that could have been invested or something and definitely earned more than 0.25%. You’ve put it somewhere to basically go to sleep for a few years while saving for a car. Then you pay cash for a new car, investing that money in a depreciating asset that loses value the moment you take possession of it, and will continue to lose value for as long as you own it.
This sort of behavior also can lead to situations where you start throwing a lot of maintenance and repair money into an old car, because you become adamant about not financing the new car you’re going to purchase so you pay little repair bills of $300-800 here and there to keep your old car going long enough to save up enough to buy a new car cash. (Or you get lucky and you drive a car 15+ years with no maintenance problems, I had a truck like that so it isn’t outside the realm of possibility.)
Generally I see it recommended by personal finance types that your monthly “installment debt” payments not exceed 15% of your income. Installment debt payments basically being any type of loan payment that isn’t a housing expense (so it discounts mortgage payments–housing generally should cost under 30% of gross pay FWIW.)
So if your car payment is 15% of your monthly income, that’s within reason assuming you don’t have any other installment loans. If you’re making big time credit card payments or such, then you need to consider that when deciding on a car.
Could your loan have been fixed for three years and then be subject to a rate adjustment? That’s not uncommon for home mortgages. I haven’t heard of this for a car loan but it’s possible.
Yes, I can afford it, I’ve been doing so for 3 years. I just can’t afford a 145% increase over the rate I’ve been paying.
And yeah, it’s a 5 year loan term. Not the best decision, I know, but I wasn’t making very good financial decisions back then. My previous car had died unexpectedly and I had to get one NOW, or else lose my job. So I went to Carmax and got a nice car that I knew wouldn’t crap out on me before it was paid off (so far, so good!). I was only able to get a practically usurious interest rate, but it was my own fault. And it’s a good car and I want to keep it, and I’ve had the same job this whole time, so I’ve never missed a payment.
Anyway! I just got off the phone with Geico and they *were *reporting a lapse in coverage (I had never called them to cancel the policy, I didn’t know I needed to… I’m dumb). I just took out a new policy with Progressive and stopped paying Geico. The rep was awesome, she called over to Progressive with me and got it all straightened out. And they’re actually sending me a refund, because apparently there was an overlap in the effective dates of both policies. I’ll get my lienholder on the ringer tomorrow, let them know my new insurance info, and hopefully everything will straighten itself out from there. Thanks again, LurkerInNJ!
Fair enough! I was somehow under the impression that rachelellogram had been experiencing financial difficulties, but I could’ve mixed her up with someone else. Either way, I again don’t know much about car financing as I’ve never had to. (Yet. I will this fall as my current car could be a ticking time bomb and I’m aware of that.)
I had no idea!
But even if her payment was 15 per cent or less of her monthly income, isn’t it reasonable to expect she’d have $150 in disposable income? I don’t know. I’ve seen my friends make $400 monthly payments on cars and carry quite a load every month, because they’re also required to have full coverage insurance. So if you’re in a certain age/income bracket, a car payment can be a beeyotch.
My current POS required repairs shortly after I brought it, but it’s been serviced and I’ll be paying close attention to it. I’m quite attached to that thing now (it’s a 98 Blazer). I know I spent $$$ over the last three years in a 2003 Chrysler 300M with low miles. I got stuck in the “I can’t afford a new car, so I have to keep putting money into this one” thing for too long. Should’ve dumped it early. It had low miles, too. That cycle can happen with any car, I guess.
I like my truck. I’m a lot more confident driving something with 4-wheel drive and sits high than a car. It’s the same kind of vehicle that I learned how to drive in. It’s going to be very hard to go from that back to a car. It’s not like Jeeps or SUVs are cheap around here, either.
I also have a couple of friends with Jeeps that plan on driving them until they die or it’s just too much of a financial drain. They don’t mind the upkeep and replacements that come up. It’s when the thing needs a new trans that it may get dumped (or someone decides they really do love their car).
The last few times I changed car insurance, the new insurance company took care of the notification. Or at least I’m pretty sure it did. It’s been a few years. I’m happy with Dennis Haysbert and Dean Winters, happier than when I had the Gecko.
Just change your driving habits to reflect the attributes of your new vehicle. I love my Expedition, and I drive it very differently than my (ex-) Continental, which I drive very differently than other cars I rent or am assigned. Right now I don’t actually drive too often; my company practically insists I use a driver. (That’s not as fun as it sounds.)
Weird. How would your insurance change cause your car loan payment to go up? Did the lender see “lapsed, RED FLAG” and tack on insurance coverage to your monthly bill or something???
A 5 year loan isn’t all that outrageous; obviously shorter is better but we went for a 5 year loan with our last new car because it did indeed make the payments affordable. Obviously we made an effort to pay a few dollars extra every month (and if you can spare that 20 dollars, you should also).
Something to consider: you might be in a better position to get a better interest rate now - I seem to recall you had a bankruptcy or something some time back, but as you get further away from that you might be able to get a better rate. Ask around: you might be able to refinance that car loan, with the same ultimate payoff date, for a lower rate.
I don’t understand this either. Is there anyone who works with this stuff who can explain? I know I’m required to have a specific level of coverage until my car is paid off, but I’m not sure how this could tie into the payment amount for the car.
Yeah I called just now, and the insurance was exactly the problem. Maybe Progressive slacked on reporting my new coverage to my lienholder. They said I just need to fax them my decs page (which I can do from work today) and I’ll be fine.
I have considered refinancing for the reasons you’ve listed, but I hate applying for that stuff because it counts as a hard credit check. I was going to apply through Chase last night anyway, but they have a minimum loan amount of $7500 and my payoff inquiry says I’m under 7k by now. le sigh
Do some googling to get an idea of how a hard credit check would affect your score. If you can save enough on the payment, it might be worth biting the bullet (which will be a temporary hit anyway). Plus if you finance 7500, use 7000 to pay off the old loan - and throw the 500 right back at the new loan. We did something similar for our car; the CU we were with was willing to refinance it (even though they were the current loanholders, LOL), but said we had to take out an extra 500 dollars.
And speaking of CUs, see if you might be eligible to join one - generally much cheaper rates for this sort of thing.
Anyway - I’m so glad you got that extra 134 sorted out!!!
