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DigitalSneakers

Is this 250% interest rate legal?

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Two and a half months ago, I financed a car. The cost was $12,000 and I made an $8,000 down payment leaving $4,000 remaining. Financing spread out the $4,000 over 60 months. Well, I recently came into some money and wanted to just pay it off. When I went to the financing company, I was told it would cost me $10,000 to pay it off. That s 2.5x what I owe!!

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Sounds like a mistake.  A $4k loan over 60 months at an interest rate of 8% would result in monthly payments somewhere in the $82 range and total payments over the life of the loan in the $4,800 range.  Needless to say, if you vary the interest, the monthly payments and total payments will vary.  When you asked for an explanation how a $10k payoff was possible (you did do that, right?), what response did you receive?  When you thoroughly reviewed your loan paperwork (you did that, right?), did you find anything that looked unusual?

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4 hours ago, DigitalSneakers said:

Two and a half months ago, I financed a car. The cost was $12,000 and I made an $8,000 down payment leaving $4,000 remaining. Financing spread out the $4,000 over 60 months. Well, I recently came into some money and wanted to just pay it off. When I went to the financing company, I was told it would cost me $10,000 to pay it off. That s 2.5x what I owe!!

 

Use the following amortization calculator to figure out where you should be today based on the figures on your loan contract which should show you the amount financed, the interest rate, the monthly payment and the number of months. Then print out the payment schedule and you should be able to see how much you owe after a couple of payments.

 

http://www.bretwhissel.net/amortization/amortize.html

 

 

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Hi @DigitalSneakers

 

Welcome to the community and thanks for your question! That certainly sounds like a frustrating situation! Some of our users have provided helpful legal direction in response to your interest rate question. You can also check out our Learn About the Law materials about Alabama Interest rate laws.

 

Let us know if you have additional questions for the community.

The FindLaw.com Team

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So after quite the lengthy process of speaking with both the financing company and the car dealership (and speaking to the financing company about the 250% increase was REALLY fun), we were able to pinpoint the error. There were a couple charges of $2,000 for warranty things and other charges for things I had never even heard about. The issue came up about me signing the papers with these costs on them, and I did, but I was able to get these additional warranty charges removed. Overall, the lesson to be learned is to read everything before you sign it; which is something everybody knows and says, but rarely do. 

 

...it is a bit concerning that things can be slipped into a contract without being addressed or explained though :(

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45 minutes ago, DigitalSneakers said:

Overall, the lesson to be learned is to read everything before you sign it; which is something everybody knows and says, but rarely do. 

 

Yes, we tell that to people here every day. Unfortunately, it's often after they have gotten in trouble.

 

46 minutes ago, DigitalSneakers said:

...it is a bit concerning that things can be slipped into a contract without being addressed or explained though :(

 

True.

 

But if you understand that's how ALL car dealers work (they go to school to learn how to screw customers) you can be prepared to catch their tactics by carefully reading everything put in front of you, and KEEPING it, something the dealers try to avoid.

 

My friend was thinking of buying a new car just recently. Whenever he goes to a dealer he takes me with him because he has no sales resistance like I do. I went to the same sales school when I sold life insurance years ago. The tactics are similar.

 

Anyway, the salesman put a "proposal" on the table showing the details of the car, the price, the add-ons, the down payment, the amount financed, etc. My friend and I looked it over. I picked it up and said "We'll take this home and review it." The guy stood up in a panic, said "That's mine" and leaned forward to grab it but I was already folding it up and putting it in my pocket. I thought he was going to jump me. You would think I stabbed him in the heart the way he reacted.

 

The dealer wants you to sign and take the car without you ever knowing anything about what you got yourself into until it's way too late.

 

 

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