I received a post card in the mail recently from my car loan company that really annoyed me.
They were offering me a break from my car loan payment, saying I didn’t have to pay my bill this month.
Aside from knowing in the back of your head that interest would still accrue, it sounds pretty nice of them right? The interest on my loan would only be about $7 for the month, not chump change, but if you really had to skip a payment that would be nice to do.
So what’s the catch?
I flipped over the postcard and found out that you can, indeed, skip your December or January loan payment, but there is a $28 processing fee to do so!
Twenty eight dollars!
That is 14.5% of my monthly $192 car payment. So after including my normal interest rate, I would be paying 17.5% interest just to have one payment deferred!
Talk about gouging you with interest
That’s similar to what credit card companies charge for interest. The most mind-boggling part of this is that it is through a credit union. I always had the impression that they were supposed to steer you in the right direction, not push you toward financially bad decisions. It makes me bet that a lot of banks offer this promotion too.
The credit union’s marketing team offers this just in time for the holiday season, when everyone is strapped for cash after buying presents for their family and friends. It makes me mad because I know there are probably a bunch of people out there who “take advantage” of this offer without really understanding how bad of an idea this is.
Now, I realize some people’s payments are a bit higher than mine so $28 might not be as big a percentage of their monthly payment. But, that means they are paying the $28 plus however much more interest they get charged each month. It is still not a smart move if you have the money and just want to spend a little more on the holidays.
They offer this crappy promotion about twice a year and it makes me cringe each time I get this notice. I think back to when I was completely financially incompetent. I used to think that deferring any payments meant saving money.
I knew very little about how interest worked, and thought that just because you didn’t have to make a payment one month, that interest magically stopped accruing on the account.
It makes me laugh to think about how little I knew just a year and a half ago. I would have jumped all over this kind of promotion and thought I was the one making out like a bandit. Now I wouldn’t touch something like this with a ninety foot pole.
But this kind of thing also makes me angry that I can’t reach out to more people and let them know they should stray away from something like this. How do I reach the younger Chenell’s of the world who don’t understand and help them get through their rough money moments?
How do I find them?