I have a stupid loan question

[Moiraine]

My student loan is made up of a bunch of loans, and I'm paying off the highest interest one first. But the principal on the others is increasing (by a few cents) even though I'm paying the full monthly payment and covering all of the interest every month. It amounts to < $5 every month but it's bothering me because I don't understand why. I even occasionally pay a few extra $ to pay on the principal. Last month I paid a specific amount into the principal on each loan so that all of the principal amounts ended in 0, so that I could make sure I wasn't going crazy, and they've all gone up by between 10 cents and $1.

 

If I have a loan for $1,000 and at the end of the month the Outstanding balance is $1,010 and I pay $10, shouldn't the principal 30 days later still be at $1,000?

Or can the interest capitalize in the middle of a month? Or am I being cheated?

[JJ Husker]

Just guessing but possibly it is being caused by the difference in time between when they say the balance is $1010 and when they credit your $10 payment. There may be some interest accruing on the $1010 balance before you think you are paying it back down to $1000. Try paying it a earlier and see if that helps. Or better yet, pay as much additional principal as you can bear each month. Interest will eat you alive unless it is a lower rate than you can earn with that same money.

[Making Chimichangas]

My student loan is made up of a bunch of loans, and I'm paying off the highest interest one first. But the principal on the others is increasing (by a few cents) even though I'm paying the full monthly payment and covering all of the interest every month. It amounts to < $5 every month but it's bothering me because I don't understand why. I even occasionally pay a few extra $ to pay on the principal. Last month I paid a specific amount into the principal on each loan so that all of the principal amounts ended in 0, so that I could make sure I wasn't going crazy, and they've all gone up by between 10 cents and $1.

 

If I have a loan for $1,000 and at the end of the month the Outstanding balance is $1,010 and I pay $10, shouldn't the principal 30 days later still be at $1,000?

 

Or can the interest capitalize in the middle of a month? Or am I being cheated?

 

Is it possible for you to consolidate all your individual loans into 1? That seems like the best option.

[Redux]

My wife finally consolidatated them down to 2 loans a month. They are both still $170 a piece or so, but it makes it more manageable.

[NUance]

You could look at your original loan document. It's a contract. It should be spelled out there. But, yeah, you're right. Interest piles up every day. Not just all at once at the end of the month.

 

==================================================

 

Here's my own experience: When I paid off my last student loan (Hurray!) I simply wrote a check for the amount owed and sent it by the due date. But perplexingly, a month later I got a letter saying I owed another 8 cents. I laughed and threw it in the trash. I got another letter the next month reminding me about the 8 cents. Again I ignored it, assuming that they would wise up and quit sending me letters. Well, after several months the tone of the letters became increasingly stern. It was really quite humorous. I got to where I actually looked forward to their next threatening letter to me, the scofflaw who owed them 8 cents. Eventually I cut them a check for 25 cents and sent it to them. Then a month later I typed up a letter saying that I had inadvertently overpaid my account. I demanded that they send me a check for the 17 cents they owed me. I never heard back from them.

[JJ Husker]

You could look at your original loan document. It's a contract. It should be spelled out there. But, yeah, you're right. Interest piles up every day. Not just all at once at the end of the month.

 

==================================================

 

Here's my own experience: When I paid off my last student loan (Hurray!) I simply wrote a check for the amount owed and sent it by the due date. But perplexingly, a month later I got a letter saying I owed another 8 cents. I laughed and threw it in the trash. I got another letter the next month reminding me about the 8 cents. Again I ignored it, assuming that they would wise up and quit sending me letters. Well, after several months the tone of the letters became increasingly stern. It was really quite humorous. I got to where I actually looked forward to their next threatening letter to me, the scofflaw who owed them 8 cents. Eventually I cut them a check for 25 cents and sent it to them. Then a month letter I typed up a letter saying that I had inadvertently overpaid my account. I demanded that they send me a check for the 17 cents they owed me. I never heard back from them.

 

You outlaw.

 

I've got 2 similar stories.

Years ago a big conglomerate who I worked for decided to close several non core businesses, one of the ones I worked for of course. At the time I was sort of pissed. I had been purchasing their stock so I sold all but one share and had them issue me an actual stock certificate for it. This was back in the mid to late 90's. Well, once they issued the stock certificate they had to start sending me quartery dividend checks. That's right, still to this day I get four 25 cent checks per year from them. They have begged me to put the stock in their brokerage account so they can simply reinvest the dividends and quit spending 40 some cents to mail me a check. Nah, I like that supplemental income. Plus as stock holder I get their yearly glitzy corporate report book which has to cost them at least $15 every year. I'm not vindictive..... Did I mention I changed the banner name on my company phone to "Blow Me" before I turned it in? :-)

 

I also have a customer that consistently pays their bills about 2 months late. They aren't a big customer so it isn't often but they always want lien waivers returned immediately. That's right, I sit on them and mail them back in exactly the amount of days their payment was late. It's the little things....

[ZRod]

JJ I don't care what Knap says, you're good people! I'm pretty sure this will be me when I'm older.

 

Compounding interest,the greatest invention know to man!

[BigRedBuster]

 

You could look at your original loan document. It's a contract. It should be spelled out there. But, yeah, you're right. Interest piles up every day. Not just all at once at the end of the month.

 

==================================================

 

Here's my own experience: When I paid off my last student loan (Hurray!) I simply wrote a check for the amount owed and sent it by the due date. But perplexingly, a month later I got a letter saying I owed another 8 cents. I laughed and threw it in the trash. I got another letter the next month reminding me about the 8 cents. Again I ignored it, assuming that they would wise up and quit sending me letters. Well, after several months the tone of the letters became increasingly stern. It was really quite humorous. I got to where I actually looked forward to their next threatening letter to me, the scofflaw who owed them 8 cents. Eventually I cut them a check for 25 cents and sent it to them. Then a month letter I typed up a letter saying that I had inadvertently overpaid my account. I demanded that they send me a check for the 17 cents they owed me. I never heard back from them.

You outlaw.

 

I've got 2 similar stories.

Years ago a big conglomerate who I worked for decided to close several non core businesses, one of the ones I worked for of course. At the time I was sort of pissed. I had been purchasing their stock so I sold all but one share and had them issue me an actual stock certificate for it. This was back in the mid to late 90's. Well, once they issued the stock certificate they had to start sending me quartery dividend checks. That's right, still to this day I get four 25 cent checks per year from them. They have begged me to put the stock in their brokerage account so they can simply reinvest the dividends and quit spending 40 some cents to mail me a check. Nah, I like that supplemental income. Plus as stock holder I get their yearly glitzy corporate report book which has to cost them at least $15 every year. I'm not vindictive..... Did I mention I changed the banner name on my company phone to "Blow Me" before I turned it in? :-)

 

I also have a customer that consistently pays their bills about 2 months late. They aren't a big customer so it isn't often but they always want lien waivers returned immediately. That's right, I sit on them and mail them back in exactly the amount of days their payment was late. It's the little things....

 

Little things can give such great pleasure.

However, sometimes they can be big things.

 

When I lived in Des Moines, I sold products to one of the largest home builders in the city. They would order several times a year and the bill would be $20,000 to 30,000 each time. Well, my terms to them were 15% net 30. So, they get a 15% discount if paid in 30 days. Well, this company would never pay on time. Finally, I got tired of it and one week after they went past 30 days, I would send them a letter saying they are past due and they owed the full amount. That's $3,750 on a $25,000 bill.....several times a year. They would simply turn around and pay the full bill and not even question it.

 

This business relationship went on for years like this. I learned to love that company.

[JJ Husker]

 

 

You could look at your original loan document. It's a contract. It should be spelled out there. But, yeah, you're right. Interest piles up every day. Not just all at once at the end of the month.

 

==================================================

 

Here's my own experience: When I paid off my last student loan (Hurray!) I simply wrote a check for the amount owed and sent it by the due date. But perplexingly, a month later I got a letter saying I owed another 8 cents. I laughed and threw it in the trash. I got another letter the next month reminding me about the 8 cents. Again I ignored it, assuming that they would wise up and quit sending me letters. Well, after several months the tone of the letters became increasingly stern. It was really quite humorous. I got to where I actually looked forward to their next threatening letter to me, the scofflaw who owed them 8 cents. Eventually I cut them a check for 25 cents and sent it to them. Then a month letter I typed up a letter saying that I had inadvertently overpaid my account. I demanded that they send me a check for the 17 cents they owed me. I never heard back from them.

You outlaw.

 

I've got 2 similar stories.

Years ago a big conglomerate who I worked for decided to close several non core businesses, one of the ones I worked for of course. At the time I was sort of pissed. I had been purchasing their stock so I sold all but one share and had them issue me an actual stock certificate for it. This was back in the mid to late 90's. Well, once they issued the stock certificate they had to start sending me quartery dividend checks. That's right, still to this day I get four 25 cent checks per year from them. They have begged me to put the stock in their brokerage account so they can simply reinvest the dividends and quit spending 40 some cents to mail me a check. Nah, I like that supplemental income. Plus as stock holder I get their yearly glitzy corporate report book which has to cost them at least $15 every year. I'm not vindictive..... Did I mention I changed the banner name on my company phone to "Blow Me" before I turned it in? :-)

 

I also have a customer that consistently pays their bills about 2 months late. They aren't a big customer so it isn't often but they always want lien waivers returned immediately. That's right, I sit on them and mail them back in exactly the amount of days their payment was late. It's the little things....

 

Little things can give such great pleasure.

However, sometimes they can be big things.

 

When I lived in Des Moines, I sold products to one of the largest home builders in the city. They would order several times a year and the bill would be $20,000 to 30,000 each time. Well, my terms to them were 15% net 30. So, they get a 15% discount if paid in 30 days. Well, this company would never pay on time. Finally, I got tired of it and one week after they went past 30 days, I would send them a letter saying they are past due and they owed the full amount. That's $3,750 on a $25,000 bill.....several times a year. They would simply turn around and pay the full bill and not even question it.

 

This business relationship went on for years like this. I learned to love that company.

 

I used to offer discounted payment terms but I don't any longer. Some of my bigger customers would simply continue to pay 10 to 20 days late, like always, but they would also take the discount. I got tired of arguing with them over the discount so I just quit offering one. These are billion dollar companies and they use little Podunk companies like mine for financing. Why if I wasn't making money on these guys I'd give them a piece of my mind.... I now have 3 or 4 pricing tiers. The guys who consistently pay late are in column #4, the one that already has about 10% interest added on top of my highest prices.

[huKSer]

One year I guessed right and had over withheld federal taxes by exactly $1. They sent me a check for $1. The next year I got another federal check for $1. This kept going until I owed the feds taxes and they used the $1 balance to off set my debt.

[Moiraine]

lol

[Moiraine]

Just got done chatting with Nelnet.

 

When I started this topic I *did* say it was a "stupid" loan question.

 

 

Well... turns out every time I'm paying my loan it's not going through right when I think it is. It's always 1 day later.

 

 

So for instance on a $3,650 loan with 10% interest I'm paying $365 interest per year, or $1 per day. So my principal would be $1 more than I expected it to be after a payment because I'm paying $1 less into the principal, because the payment is being applied 1 day "late."

 

My interest isn't actually capitalizing. I'm just paying slightly less into the principal than I thought I was.

[JJ Husker]

 

But seriously, glad you got it figured out.

[Moiraine]

 

But seriously, glad you got it figured out.

You were only like 90% right. Paying it earlier doesn't have an affect on the "problem" I was having. It still meant I had more principal left than I expected based on thinking it was being applied sooner than it was.

[JJ Husker]

I am super confused. If paying it earlier wouldn't have solved it and the principal was still growing, then the only possible problem left is that the payment was not high enough to even cover the interest. The thought of an interest only payment scares the sh!t out of me. At that point you're just lighting money on fire and gaining no ground. Unless Im missing some intricacy of a student loan, the only way principal can grow is if unpaid interest accrues to the principal or if you borrow more money and I assumed you were not voluntarily adding to the principal.