Are You Confused About How To Payout Your Car Finance ...

If you have a car that already has finance and are looking to sell or if you have the money to pay your car finance out early, how much will it cost? And are there any penalties for finishing the loan early?

The first step is to contact your finance company and ask for a payout letter. The lender will send you a letter which will contain the payout figure and a date. The payout figure is the amount required to be paid to finalize the loan. The date given is the day that this payout amount is valid till, with the way interest is calculated, the payout figure will change at certain intervals and if the loan is to be paid out early this date is very important. If the date expires, the payout amount will change.

Depending on the type of finance that you have, the amount you have to pay will vary.

If you have a consumer loan your loan payout amount will be made-up of the principal owing plus a percentage of the fees and charges that would have been paid if the loan had gone the full term. Obviously the less time left on the loan the smaller the payout will be. With a consumer loan an early payout will save paying any interest that would be owed across the rest of the loan.

To calculate how much will be owing at any time on a consumer loan, you can divide the principal payments by the months in the loan and multiplying this figure by how many months are left, this calculation will give you the principal owing and then use the same calculation for the fees and charges.

If instead the loan was a business loan, the payout amount will also include a percentage of the interest that would have had to be paid over the rest of the loan, as well as the principal owing and a percentage of the fees and charges. The amount owing on a business loan is calculated on a pro-rata basis and unlike the consumer loan can only be worked at the time of needing a payout letter.

If the buyer of your car is getting finance themselves, it makes the expiry date of the payout very important. If the purchaser is getting 100% finance, the figure on all their contracts must match your payout letter exactly. If they do not get finance settlement by the date on your payout letter, the whole settlement process needs to be completed again which requires a new payout letter and the buyer needing to sign new contracts. This is not overly common but can cause headaches if you are looking to sell the car quickly and easily or wanting to sell before you have to make any more repayments yourself.

Overall paying out finance is a straightforward process, and the finance company will do all the calculations for you and send you all the details. Make sure that you pay close attention to the date the amount is valid for and you won?t have any problems.

For more about finalizing car finance check out the free resources available at Finance HQ including articles, tools and information about car finance.

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Source: http://studentloan-forgiveness.org/are-you-confused-about-how-to-payout-your-car-finance-3/

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