LittleBlueTractor
Gold Member
Had quite a scare over the last few days and I'm probably not the first person to go through this.
Bought a new LS S3010 last week. (If you want pics go to the "All other brands" forum.) Put 3k down and financed the rest at 7.25% through Agricredit. Got my payment coupon book in the mail a few days later. Called Agricredit to tell them I intended to make larger payments than that listed on the coupons and wanted to be sure that anything extra was applied to principal only instead of future payments.
The guy told me they would apply anything extra to future payments, but I would get my interest break on payoff. That sounded pretty spooky so I sent their customer service people an email asking if there was no way to pay down my loan to avoid some of interest charges. While waiting on a reply I found the loan contract and the "Precomputed Contract" clause. Goggled that and felt even worst (really harshed the buzz I had going on the great tractor deal I thought I had made.) Depending on what method is used to determine how to handle prepayments ("rule of 78s" or "actuarial") you can suffer a pretty serious prepayment penalty. Pretty much everything I found out there discussed the rule of 78s method and how it was such a rip-off.
After much gnashing of the teeth and such (including looking into a home equity loan to pay it off immediately) I got a call from Agricredit (a real nice and patient young lady) explaining that even though they do apply all prepayments to future payments initially, on payoff they do the actuarial thing which results in you basically having a plain ol' simple interest contract. Feeling much better, but not TOTALLY sure, I found "actuarial method" in the "Additional Terms" of the loan contract discussing prepayments.
So all is well, but it occurred to me that there may be others out there suffering from this same misunderstanding. No need for the parental "read before you sign" stuff. I did read it, saw the "no prepayment penalty" language and assumed everything was OK. It was, but I've seen a lot of confusion about this on some of the forums and I thought it best to post something about it. Happy tractoring to you!
Bought a new LS S3010 last week. (If you want pics go to the "All other brands" forum.) Put 3k down and financed the rest at 7.25% through Agricredit. Got my payment coupon book in the mail a few days later. Called Agricredit to tell them I intended to make larger payments than that listed on the coupons and wanted to be sure that anything extra was applied to principal only instead of future payments.
The guy told me they would apply anything extra to future payments, but I would get my interest break on payoff. That sounded pretty spooky so I sent their customer service people an email asking if there was no way to pay down my loan to avoid some of interest charges. While waiting on a reply I found the loan contract and the "Precomputed Contract" clause. Goggled that and felt even worst (really harshed the buzz I had going on the great tractor deal I thought I had made.) Depending on what method is used to determine how to handle prepayments ("rule of 78s" or "actuarial") you can suffer a pretty serious prepayment penalty. Pretty much everything I found out there discussed the rule of 78s method and how it was such a rip-off.
After much gnashing of the teeth and such (including looking into a home equity loan to pay it off immediately) I got a call from Agricredit (a real nice and patient young lady) explaining that even though they do apply all prepayments to future payments initially, on payoff they do the actuarial thing which results in you basically having a plain ol' simple interest contract. Feeling much better, but not TOTALLY sure, I found "actuarial method" in the "Additional Terms" of the loan contract discussing prepayments.
So all is well, but it occurred to me that there may be others out there suffering from this same misunderstanding. No need for the parental "read before you sign" stuff. I did read it, saw the "no prepayment penalty" language and assumed everything was OK. It was, but I've seen a lot of confusion about this on some of the forums and I thought it best to post something about it. Happy tractoring to you!
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