Understanding Extra Payments to Your Amount Financed

When it comes to making monthly payments on your auto financing, it’s important to know that you may have options beyond paying the fixed amount. Paying extra toward your account can, in the long run, reduce the amount you pay in finance charges over the life of your financing. As Fortune.com1 points out, the dollars you save in finance charges may not be huge, but paying down your account ahead of schedule could help free up money in your budget.

Our experts at Ally Auto have compiled a list of common questions to help you better understand how paying extra toward your Ally Auto account works.

Q: Will you apply my payment only to reduce my outstanding balance of the amount financed?

A: No. We will apply your payment first to any past due amount, then your current payment due, and next toward any fees, late charges, etc. Paying more than your scheduled payment amount (and/or paying sooner than the scheduled due date) will result in more money being applied to reduce the outstanding balance and potentially paying off your account sooner (assuming you do not pay late). It’s important to note that Ally’s standard practice is to apply your extra payments received to future due dates.


Q: How do consumers make payments to only reduce the outstanding balance of the amount financed?

A: We will not apply a payment only to reduce the outstanding balance. Each time we receive a payment, we calculate and collect a finance charge for the period from the date the last payment posted to your account up to the day we receive the next payment. Any extra amount you pay over the amount of your regularly scheduled payment is automatically applied to future payments, assuming the account is current and there are no past due payments, late charges or other unpaid charges owed on your account. Each payment, regardless of the amount, is applied this way automatically, so you can make your payments as usual, including any extra amount you like. Many of our customers find it convenient to enroll in AutoPay on our website, where you can indicate how much you intend to pay each month, and we will apply the payments as we have described.


Q: Will making additional payments on the amount financed change my monthly payment at all?

A: Although paying extra amounts result in your billing statements and account status indicating your next payment is for less than the scheduled amount, or that your next payment may not be due for several months into the future (depending on how much extra money you paid), you may pay the scheduled payment amount, more than the scheduled payment amount or the reduced amount shown in the billing statement or account status. Think of the next amount due shown on the billing statement or account status as a “minimum” — to keep your account current. In other words, we need to receive the amount shown on the billing statement by the due date so that your account remains current. This does not limit you from paying extra whenever you like.


Q: My contract states I can prepay without penalty. Isn’t it a “penalty” when you charge me finance charges?

A: No. You agreed to pay a finance charge when you signed the contract. As your contract shows, the finance charge is the cost of credit to you. By paying an extra amount when you make your payments (and if you are never late), you will pay less than the total finance charge disclosed on your contract and you will pay your account off sooner. There is no penalty charged for paying off your account sooner.


Note: These Q&As apply to standard Ally retail installment contracts, not Ally Buyer’s Choice or Ally Balloon Advantage. These answers are intended to assist customers in understanding the basic method of a daily finance charge contract and are not intended to describe the process in detail.


Other Blogs You Might Like

Introducing Ally Auto Mobile Pay App

Understanding Balloon Financing

Auto Finance Glossary: Key Buying and Leasing Terms



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  1. 1
    Cyndie Lund

    How much do I owe remaining on my Jeep. I believe it’s under my husbands name. His name is Tim Donohue. Thanks!


  2. 7

    So if my monthly payment is $231 and I pay $281 one month … it would take the additional $50 off my next month … asking me for $181 … but I can still pay the 231 if I want

  3. 9
    Daryl Imler

    Please advise me of the amount I would have to pay on a particular date to pay off my loan. What is the total interest paid if I pay off the loan? Also please advise me of my current balance.


  4. 11
    Jason Garland

    I would like to reduce the principal balance by paying extra is that possible if your applying extra funds to future payments?

  5. 15
    Daniel Iser

    Just a thought, a lot of these comments could easily be answered with legitamit, straight forward, no double talk, honest answers. I mean half of them would be cleared up if you simply stated, “We do not allow you to pay directly to principle, regardless whether you call or not” or “We do allow payments to principle directly, but in order to do this you must set it up directly with a representative or mail a check with a notice attached” etc. Telling people to call in, where they then get someone who likely doesn’t have an answer for them either. Rather than hide policy behind a wall of people that can’t help you either, why not simply be transparent and let people know the truth. In my industry, posting stuff like that publicly can reduce support requests by massive amounts.

    Thus honesty now = less support cost = more profits = not having to mislead people later = maybe actually letting people pay of their loans early like any honest financial institution without compromising your bottom line.

  6. 16

    Love how they keep saying call. Glad I don’t work with ally anymore for my car financial if u can’t put money towards your Principal That should tell u something right there(red flag)

  7. 17

    Just to be clear.. You are not allowed to pay towards your principle? I have not had a good experience with this loan company and this just tops it off.

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