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VW Credit: Simple Interest loan or rule of 78?

brennok

Ready to race!
Location
Tampa, FL
It has been several years since I financed a car and some friends were telling me a lot of car loans are now using the rule of 78 method where paying off the loan early ends up costing you more than paying the minimum payment each month.

Does VW credit use this method or are their auto loans just based off simple interest where the earlier I can pay it off the better?
 

gonyofam3

Ready to race!
Location
corona, ca
It has been several years since I financed a car and some friends were telling me a lot of car loans are now using the rule of 78 method where paying off the loan early ends up costing you more than paying the minimum payment each month.

Does VW credit use this method or are their auto loans just based off simple interest where the earlier I can pay it off the better?

I just bought my 2nd vw through vw credit and I was told by the finance dept that the loan was simple interest and that if I pay it off early it would save money due to fact I wont be paying interest for the duration of the loan just the payoff.
 

Raddicted

Perfectly insane
Location
Therapy
Simple interest.
 

Hamann

Banned
Location
TAMPA
simple interest.

17 states currently prohibit the practice. The rule of 78 was something in the past, a quick and easy way to calculate interest..where you pay the same interest each month. If you were to pay the loan off early, you would have to pay a little extra because the initial payments attribute too much to interest, and too little to principal.

Bottom line...if you see "rule of 78"...get another loan.
 

brennok

Ready to race!
Location
Tampa, FL
I kind of figured. The only reason I asked was I was debating paying off the car early and someone mentioned the rule of 78 which I had never heard of.
 
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