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OT for financial gurus...
Posted by bRAD [Email] (more from bRAD) on Wed, 19 Feb 2003 17:00:00
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If someone told you that a loan was "open" how would you interpret that?
I interpret it as if I make a payment in addition to what is required at the end of each month, the additional payment will go directly towards the principal.
Now lets say I've made a mistake. If I was told the financing was "open" and then discover I'm free to pay the entire balance in one lump sum, but anything less than the full amount owing will simply be used against my regular monthly payments (with interest calculated as normal) would that still be considered "open"?
For example: Say Bob borrows $1000 with open terms. His monthly payment is $100
At the end of month 1, Bob pays $600 thinking he's made his $100 payment and reduced the principal by an additional $500, bringing the amount owing to $400 (+ the interest accrued during month 1)
As it turns out... What Bob's just done is to pre-pay 6 monthly payments. The creditor will hold on to Bob's money for him (how considerate! and interest free too!) The creditor will make Bob's next 5 payments for him from the remaining $500 pool, and charge interest each month no different than if Bob had simply paid $100/month for 6 months.
Would Bob have any recourse besides paying the full balance now?
posted by 65.123.118...
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