Conference 7.286::dcu

    
    
    I found it very clear that the loan in fact would be paid off in
    44 months instead of 48... I believe their literature they sent 
    around with the "refinance your car loan offer" (last August) stated
    that with the weekly deductions you save $$$ because the loan is paid
    off in 44 months...   I can't believe that the literature would change
    that much in 7 months..
    
    John
    

I, too, understood what they did although I don't think that
it is nearly as clear as it should be.  The loan which is
advertised and referred to as a "2 year", "3 year" or
whatever loan is really not a true 2 year or 3 year loan
since it gets paid back early.

Collis

This is far better than what they used to do.
They used to take the same amount of money out each week as now but only credit it to
your loan once a month or at least four weeks of payment each month.  Each quarter 
there was an extra week of deduction from your pay because of the thirteen weeks
in the quarter and only needing 12 weeks of payments.  So , once a quarter they 
put the $ into your saving account.

    I usually do a good job of reading the fine print on such things as car
    loans.  I don't remember seeing anything that stated that I would be
    making 13 monthly payments a year in the paperwork that came with the
    private sale.  I only have a small amount of money in my DCU account
    as we use another bank for most of our bills.  I had not seen the
    brochure describing the way the new loans were supposed to work as
    I don't have a need to dig through the monthly statement.  

    > So , once a quarter they  put the $ into your saving account.

    If it were done this way, at least the out-of-pocket cost of the
    loan to me would be what I had expected.

    I'll have to dig out the copy of the paperwork I signed to see if
    the extra payments required by the weekly payroll deduction were
    spelled out.  From memory, I remember seeing it only spelled out
    in monthly terms plus the .5% discount for using payroll deduction.

    I still think that if a loan is going to cost me more every third month
    then the standard loan I expected to be signing for, that fact should
    be clearly spelled out in the paperwork that I'm asked to sign and
    on rate cards and such.  I can't compare the monthly cost of a DCU
    loan against a third-party loan if one requires 13 payments a year
    and the other 12 but that fact is not spelled out anywhere.

    						MJC

  >I still think that if a loan is going to cost me more every third month
  >then the standard loan I expected to be signing for, that fact should
  >be clearly spelled out in the paperwork that I'm asked to sign and
  >on rate cards and such. 

The loan doesn't cost more.  It's still a 7.9% or 8.9% or whatever loan.
However, the payment schedule does work out so that the loan is payed
off a little earlier than a "normal" loan for that period.  If by "cost
more" you mean "pay more sooner", that is indeed the case.  You pay more
sooner than you would with a similar loan from another institution.  This
is made up by the fact that you pay off the loan earlier and end up paying
less money total (since you borrow the money for a shorter period of
time and therefore will not pay as much interest).

  >I can't compare the monthly cost of a DCU
  >loan against a third-party loan if one requires 13 payments a year
  >and the other 12 but that fact is not spelled out anywhere.

Well, you can and you can't.  If you shop by interest rate, than that
truly is a good comparison.  It is true that with "odd" loan lengths
(because of their formula for deducting from paychecks causing 24 month
loans to be paid off in 22-1/4 months or so, for example) it is difficult
to compare cash flow payments.  Now, if other institutions would just offer
22-1/4 month loans, you could compare cash payments too!

Collis

> If by "cost more" you mean "pay more sooner", that is indeed the case. 

    On a monthly cash flow basis, the 13 payments/year loan costs more
    but for fewer months.  The total cost of interest over the life of
    the loan is less.  I expected that a 48 month loan had a cash flow
    that I could calculate.  The real required cash flow is higher.

    The extra required cash flow is no big deal when both my wife and
    I are employed but it does make things a little tighter than we
    expected if one of us was to lose a job.

    The main problem that I have with this is the mismatch between the
    advertised product that I think I'm buying and the one that I was
    actually sold.  If a grocer advertised milk for 59� a quart I
    would not expect that I should have to by a gallon jug to get that
    price.  If the DCU offers to give me a 48 month loan I don't expect
    to find myself with a 44 month loan after I've signed the papers.

> Well, you can and you can't.  If you shop by interest rate, than that
> truly is a good comparison.  It is true that with "odd" loan lengths
> (because of their formula for deducting from paychecks causing 24 month
> loans to be paid off in 22-1/4 months or so, for example) it is difficult
> to compare cash flow payments.  Now, if other institutions would just offer
> 22-1/4 month loans, you could compare cash payments too!

    I *CAN* compare a 22.25 month loan with a 24 month loan if I know all
    the variables up front.  Remember in .0 that I figured out the 44 month
    term using an EXCEL spreadsheet.  I could do the same with any loan
    if I know up front how I they will deduct the payments.  If I am not
    told, I can't do a fair comparison.

    I picked up the auto loan brochure at the DCU the other day and you
    can tell that the payments will be monthly/4 rather than monthly/4.333
    if you read it closely.  I could not find the same info in the copies
    of the paperwork I signed.  A close reading also reveals that the
    same discounted interest rate can be obtained by signing up for
    the monthly auto-withdraw method which takes only 12 payments a year.  
    I'm a little bit squeamish about allowing anyone to take money out of one 
    of my accounts so I'm not likely to choose this option.  If they goof one 
    month and take out two payments, checks could bounce.

    I think that the DCU would serve it's members best if it published
    the advantages and disadvantages of each payment method so that people
    could make an informed choice.  Doing otherwise can leave people
    feeling like someone took advantage of them.  

    						MJC

    When I signed the papers for my car loan the loan officer (Karen
    Esposito...she was great to work with) explained clearly about the 
    early payoff with the weekly deduction.
    
    Marty