Originally Posted by
VTcharter
The last contract that I read, states that there is no penalty for paying off early, however monies in excess of the monthly payment submitted per month will not go toward paying off principal, and instead wil just be deducted from what you owe on the next months payment. If this is the case, paying extra every month will pay off the loan early, but you will still pay the same in interest, as the same amount of payments will be made. I would suggest putting the extra money that you would pay per month into an interest bearing account of some sort (money market, CD, Mutual Fund)...something that will not penalize you for closing the account in five or ten years, then keep making your monthly payments. When you have enough money in the saving account, withdraw it, and pay off your loan in full. Paying off in full is the only way that you will pay this loan off without bearing the full brunt of all of the interest compounded over 20 years. Paying extra per month will not do it.
It sounds like KeyBank keeps evolving its contract to screw over each new borrower more and more. I signed the papers in April 2002, and started repayment October 2003. I know from my experience that after paying the monthly payment for three years, my payoff amount had gone up about $3,500 and the principal had not even been touched. After selling my house to move to another job, I was able to put some of that equity towards the loan to start working on the principal. I'm not sure about each specific loan, but in my case, paying more per month
does go toward paying off principal, but only
if you have already paid all accrued interest. What most people don't realize when they sign (like myself), is that when your 20 or 30 years is done (however long Key financed it), your loan will probably not be paid off if interest rates went higher than when you signed the loan. That means you will be stuck with a balloon payment to payoff or refinance.