We got the loan for the car we wanted, (2005 Volkswagen Passat TDI station wagon -it's a 2.0 liter, 4 cylinder diesel- with 150,000 miles.) We had to go through a secondary finance company and the interest rate is 23.67%. Our payments are $275.00 per month for 28 months. At first it looked like simple interest, but then she told me that it's 'Rule of 78.' It's not 'ideal' for a loan, but it was the only way we could get this particular car because of it's age and mileage. (And the finance company assured me that they report to all 3 credit bureaus, so I'm hoping this will help our credit scores as well. I did some research on this kind of a loan and from what I've read, it looks as if paying the car off early won't save me any interest at all. (Of course, getting out from under the payment is a benefit.) Does anyone know anything about this type of loan and if there is any way to save on the interest?
Thank you for your useless contribution of handing me the condom after I got pregnant. If you don't have anything useful to say, why don't you just be quiet and let the adults talk, ok? When I signed the papers, I knew I wasn't familiar with this type of financing, but we needed to get a car that day and I was fully aware that I may be overpaying and was prepared to do so. So I asked about it to get some advice from people who might actually know (not you apparently) what, if any, my options are now.
Sorry to see that your question was missed Fl2BoysMom. Here's a very delayed response, although it sounds like you've probably already figured this out. If you don't pay off the loan early, simple interest loans and Rule of 78 loans will be equivalent. You will pay the same amount in interest. The problem is if you want to pay off the loan early, you will end up paying more interest with the Rule of 78 loan. There's really no way around that. Hope you're enjoying the car! And I hope your payments are helping to boost your FICO credit scores as well. Cheers!
