Secured loan payments credited inappropriately

[Misty220]

What is the name of your state (only U.S. law)? AL

I have a fixed rate (8.75%) Real Estate Secured Loan with a local bank that I've made payments on for 3 years. It is time to reevaluate and continue making payments, refinance elsewhere or pay it off. The balance is $21,900 so payoff is not an option. I was issued a coupon payment book instead of a detailed monthly statement.
Big mistake! I now know the $224.00 monthly payments to principal and interest have fluctuated each month with payment to principal sometimes as low as $20.00. This has to be wrong! I've ask for the amortization schedule and an explanation as to how the payments were calculated and applied to the P&I. The loan officer has not been helpful or forthcoming with answers. It seems this loan was not setup to be paid off and is, at the least, unethical practice by the bank. Do I have any recourse against the bank?
I am looking for options to refinance elsewhere but I don't believe I can get it processed before this loan is due.

Your input would be greatly appreciated. Though, I already know it was stupid of me not to keep up with this loan the way I should have.
Please let me know if you need more information.

Thanks in advance!

[Zigner]

Originally Posted by Misty220

What is the name of your state (only U.S. law)? AL

I have a fixed rate (8.75%) Real Estate Secured Loan with a local bank that I've made payments on for 3 years. It is time to reevaluate and continue making payments, refinance elsewhere or pay it off. The balance is $21,900 so payoff is not an option. I was issued a coupon payment book instead of a detailed monthly statement.
Big mistake! I now know the $224.00 monthly payments to principal and interest have fluctuated each month with payment to principal sometimes as low as $20.00. This has to be wrong! I've ask for the amortization schedule and an explanation as to how the payments were calculated and applied to the P&I. The loan officer has not been helpful or forthcoming with answers. It seems this loan was not setup to be paid off and is, at the least, unethical practice by the bank. Do I have any recourse against the bank?
I am looking for options to refinance elsewhere but I don't believe I can get it processed before this loan is due.

Your input would be greatly appreciated. Though, I already know it was stupid of me not to keep up with this loan the way I should have.
Please let me know if you need more information.

Thanks in advance!

Read your loan agreement...

[ecmst12]

I think you don't quite understand how loan payments work. Every time you send it a payment, it is applied to accrued interest FIRST, and then to principal. The amount of interest depends on how long it's been since your last payment, since the interest accrues on a daily basis.

If you make your payments on the exact same day of every month like clockwork, then as you pay the loan down, the amount that goes to interest will slowly go down over time. It will start out quite high, with the majority of the payment going to interest at first and a lesser amount going to principal.

However, if you make the payments at varying intervals, then there will be a much greater variation in the amount of interest that accrues. If your payments were 3 weeks apart, then obviously a lot less interest will have accrued then if your payments were 5 weeks apart.

So what can you do? Don't let more then 30 days go by between payments, and make higher-then-minimum payments whenever you can.

[Country Living]

This is not a financial board.... but....calculate what your payments would have been had this been a fixed rate note. Make that payment every month. Include insurance and property taxes if they are escrowed.

You'll need to show on each and every coupon how much you want to go to principle, interest, and escrow.

Contact your loan company to make sure they are in agreement with your calculations (or have them do the calculations.) This requires you sit down in front of a loan officer. The one you just worked with may not know what he's doing (it is possible with new loan officers.) If you can't get help at the branch, contact the parent office.

Save copies of everything (this includes the coupons and checks) and about every six month sit down with the loan officer to make sure they processed the payments according to your instructionsl

As Zig said, you need to read your loan agreement. Do that first.

[ecmst12]

Um...OP said in the very beginning that this IS a fixed rate loan. The fluctuations in amount going to principal and interest are, I'm almost certain, due to variations in the number of days between payments. I had this same issue with my own student loan a while ago and I called and gave the customer service people an earful until they explained the same thing I posted before.

[Country Living]

Originally Posted by ecmst12

Um...OP said in the very beginning that this IS a fixed rate loan.

You're right... I read his posting several times and missed it each time. Shame on me.....

[Stevef]

A loan for $24,500 at 8.75% for 15 years would yield payments of $244.86/month. that would also show a balance near $21,900 after the 37th payment.

First payment would have been $178.65 in interest and $66.21 in principal.

37th payment would have been $160.09 in interest and $84.77 in principal.

As a rough guess, each payments would accrue about $5/day in interest. A payment made ten days late would have accrued an extra $50 in interest, leaving $50 less from that payment for principal.