Publisher, Gettysburg Times,
I recently discovered that I have a problem and I believe many of your readers have it too.
I paid my home loan a few days early each month. I pay on a 28 day schedule instead of monthly. My mortgage company is more than willing to take my payment when it arrives and credit it to my account. However, they do not recognize me for prepayment by not charging me daily interest on the loan from the date of receipt to the actual due date. That means I don’t get credit for not owing interest on the loan for those days; the funds must be used to reduce the principal, and the new principal amount determines the daily interest rate for the following month from the receipt of the last payment. I have a new loan which is relatively large and for a period of six months they overcharged me over $400. This is a 30 year loan, so imagine how much I (or you) might be overcharged for the loan.
The way it should work (the way a responsible company does it) is they take your money when it arrives, charge you interest based on how much principal you owe and how many days until the payment date current received. If it’s 30 days, you’re charged 30 days interest, if 20 days, you’re charged 20 days, if 50 days, you’re charged 50 days interest and probably a late payment penalty. What remains after paying the interest due (the “vig”) is used to reduce the principal. Check your car loan; I’m sure it’s done that way.
In the pre-computer days, the way my loan was handled was reasonable, but now it’s overburdening me. The flip side would be that if I paid 14 days late each month, not long enough to be penalized, I would have the funds for the extra 14 days and would be charged interest at the lower rate for the next payment. Loan companies borrow money and pay interest based on the daily balance due, why can’t I get the same from them.