Explanation for why the money is going to interest right now.

Patrick,
I worked for HSBC Auto finance, Of course when I worked them it was HAFC (Household Auto Finance Company). I wanted to clarify some confusion for you, since apparently the Representative who answered your call, did not completely understand how your situation works. When you financed your car, you had an interest plan called a Simple interest, or Daily simple interest loan. What that means is that instead of having a fixed interest rate, where you always pay a certain amount to the interest rate for the duration of the loan you have a interest rate that is applied daily. Now that can be good and bad... It can be good, if you make your payments on time and can even work for your benefit if you make a little more than your normal monthly payment, even if it is only $5 or $10. Now I will explain how it works in your favor... Take for example a fixed loan you will always pay 150 - 200 a month in interest for the entire duration of the loan. Where as a Simple interest loan you will be charged lets say $4.50 every day for interest, in the beginning of the loan. Dealers will say youre getting this big deal and you wont have to make your payment for 45 days or what not. What dealers love to leave out is that for those 45 days you will be accruing interest. So when you do make your first payment you will see that a huge part of your payment went to interest. That is because at the beginning of your loan you will have the highest daily interest rate for your entire loan. As you make more payments your daily interest rate goes down. It is actually a teeter totter loan, where you pay more to interest in the beginning and very little in the end. The Government actually set that interest rate plan up, to help consumers avoid having all their money go to interest in a fixed loan, and giving the consumer the opportunity to be able to pay down on the Principal amount which when you get the principal amount lower and lower, you daily interest rate goes lower and lower. in essecnce you pay less in interest and you pay more to your actual vehicle. There is a whole mathematical formula to calculate the daily interest rate, and would be way too much to write on here now. I wish I could speak to you, and explain it over the phone, I just feel for you because youre exasperated, and the rep you spoke with didnt understand his job fully enough to be able to help you. Also dealers are so ignorant, they couldnt even understand how this loan works if they went to school to learn it. In your case, when you wrecked your vehicle, Then insurance company is suppose to call and get a letter of guarantee, to pay off the vehicle. Chances are that you were so upside down on the loan, and the dealer over priced your vehicle. So when the Ins. went to pay it off, they werent able to because you overpaid for the car, and so they only sent what the blue book reported. When you first bought your vehicle Household, sent a letter talking about GAP ins. that you could purchase. Most people dont do that, and that is a huge mistake. What GAP ins. is, is for people in your exact situation, where their ins. wont pay off the entire balance of the vehicle, and so GAP coverage would then go into effect and pay off the remaining balance of what your ins, co wouldnt pay for. When most people get into accidents, they stop paying their car payment. Its very important to remember that the dealer has nothing to do with HSBC, the insurance companies have nothing to do with HSBC. HSBC is a finance company. That is all theyre there to do, is to loan you money to purchase the vehicle you wish to attain. They can not help you if your vehicle was in a wreck, or if it needs fixed. They have nothing to do with any dealers 'deals'. People often get angry at HSBC because they do not understand those 2 things. Signing all those contracts is stating that no matter what happens you will live up to your financial obligation to HSBC, because until that loan is paid, HSBC is the lienholder and they own the title to that car. So assuming from what you said was on your statement, you probably stop paying your car payment for months... when your insurance didnt pay off the vehicle and left the remaining balance for you to pay, you had accrued sooooo much interest. you probably had months of accrued interest. and so you will see the first 2 or 3 or even 4 payments are going to go to the interest. That has a huge part to do with your insurance company. Your beef should honestly be with them. They sat on your claim for so long, and in the end they still didnt pay off the entire loan, in return leaving you with the remaining principal balance, and tons of accrued interest. If I do not speak with you again... Please contact HSBC, ask to speak with a manager, so they may be able to fully explain how a simple interest loan and the daily interest rate is calculated, and please please make sure you buy the GAP insurance. I hope I was able to explain the confusion. You will pay off this loan, it will not stay that way forever.. I promise. To other consumers, make sure that you understand what youre signing for. ~