Gmac Financing penalty charged for early pay-off of vehicle Louisville Kentucky

Jimmy, I understand your feeling that it's a penalty and in a way it sort of is, but you might look at what you did as a choice. I'm not being critical - I'm trying to explain it as a choice made and there may be value in that choice you haven't thought amount.

Clearly, you had the funds necessary to pay off the automobile. You could have taken that money, invested a portion of that money (all the while making the payments with the rest of the money), and earned interest or other gains from the investment instead of paying off the car. In essence, you are earning money from it being in your possession instead of penalizing yourself by not being in possession of it. Since the car loan is a fixed expense, whether you pay it off in a day, or for the remainder of the term - the loan is a sunk cost and investing your money offsets a portion of the "penalty" you would have had to pay anyway.

However, I also understand the idea that no one wants to be in debt and to have that debt off a credit report is a good thing if you have other things to do. There are many choices we can make with money. You made a choice to be out of debt and have a cleaner credit report. To some people, the price of a clean credit report is simply priceless; you may not right now - but you will one day. You might look at the financial aspect of what happened and consider it a penalty; but I think there is value attached to the choice you made you haven't considered.....

We had excellent credit at the time and had automatic deductions from our bank account. There was no late charges or deferments.

I have the figures and have done the math. Most finance companies give you credit on the interest for the remaining years. Gmac financing as well as ford motor company are the only ones that I know of that do not give you credit for interest on the remaining years.

A retired lawyer friend has looked over the contract and in his opinion this is indeed a penalty. That is why we sent a certified letter expressing our concerns.

I don't know what kind of car loans you people get, but when I pay off or trade in my car before the allotted time, the pay-off amount is substantially lower than the balance of the loan. That's because THEY ARE DEDUCTING THE INTEREST! You DON'T pay interest on a normal, tier 1 GMAC car loan for the full term if you pay off the car early. PERIOD. Now, maybe you have a tier 3 or 4 loan, which you didn't mention, and if that's the case, I don't have any idea how those work. I would still find it hard to believe that they would charge the same amount of interest to pay off the car as if you kept it.

I have bought/traded/payed off 10 cars in the last 7 years. I am not 'wrong'.

They don't charge interest through the full length of the loan. They charge interest through the day your payment was posted. However, with the way loans are amortized, you do pay most of the interest in the early years. You can't get away from that, that's how they all do it.

Go online to an amortization calculator. Put in the original financed amt, the length and interest rate. You can get a rough idea from that where your payoff should have been after the amount of payments you made. Then you can find out how much you were overcharged, then figure out why. This only works out exactly if you have never been late with your car payment, but at least you can get a rough idea.

You may feel it's a pre-payment penalty, but it's probably late interest or you didn't realize that after paying for so many years that you can still have such a large balance.

Did you take any deferments while financing the car? They do make you pay those when you payoff the car. Were you ever any days late with your loan? They charge daily interest when you're late. Then your following month's payment (after the late one) went to the extra days of interest from the month before, and not towards principal. That can put you behind too. Look up simple interest online to see how simple interest loans work. Most auto loans are simple interest loans.

Jimmy, a car loan doesn't work the same way as a mortgage does. When you commit to a car loan of any length of time, you pay the same amount of interest whether you pay off the loan in accordance with the schedule, or if you pay early. All standard car loans work this way. I've had a GMAC car loan before; it's in black and white in the agreement you signed.

GMAC did not rip you off; instead you ripped yourself off by giving GMAC the money they wanted early. Just pay the money you owe them. Lesson learned.

All contracts for GMAC financing have a clause that states there is no penalty for early pay-off. However; they still charge you interest for the full term of the contract. Say that you pay-off your loan in one year....GMAC still charges interest for the full five years or term of the contract. This is in fact a penalty. The same goes if your vehicle is totalled and the insurance company does not pay-off the balance owed.

GMAC does not have a pre-payment policy on cars, unless it's a lease. But, your story is so full of holes, I have no clue what you're saying. They also can't accelerate your loan, unless you are late and it's gone to repo status.