If you want to pay down the principal on your Chase car loan by adding a little extra to your payment when you pay online…well, don’t bother. Sean discovered that paying a little extra on your auto loan isn’t so simple. Any extra money you might send is considered an early payment for next month…not applied to the principal. Sneaky.

I found out a sneaky detail about Chase Auto Loans today: unlike other banks (Wells Fargo comes to mind), when you over-pay your monthly payment Chase considers the extra cash an “early payment” and NOT principal reduction. This way, you can’t reduce your principal (and hence your interest payments) over the life of the loan. This wouldn’t be a huge deal if the online bill-pay options allowed you to choose between early payment or principal reduction (although why anyone would choose early payment is beyond me), but instead special checks have to be mailed to Chase Auto Finance for any principal reduction to occur.

I think this may only be an issue with online payments. Maybe it’s possible to apply extra payment to principal reduction with paper, but I bank solely online.

I find this practice duplicitous and misleading–frankly, I think it should be illegal. I figured I’d send Consumerist a heads up about it. I’m going to try to refinance the loan to a less-malicious lender that doesn’t make it so hard to pay your loan off early.

At least they’re not charging an early payment penalty, too.

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