Cana bankuse any amount of a payment for late fees instead of interest and principal on an auto loan?

My auto lender keeps using part of my payment on a auto loan on late fees instead of the principal and interest. Is this legal? It seems like they are double dipping.

Asked on September 1, 2011 under Bankruptcy Law, Arizona

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

You need to check the terms of the loan agreement or contract; if the agreement allows them to apply part of a payment to any late fees, then they can do this. Note that it is very common for various loan or credit agreements to provide that when there is a late fee, either any payments are automatically applied to it first, or the lender has the option to apply the fees however it chooses.

Therefore, this may very well be legal, but as stated, the loan contact or agreement will govern--whatever it says, goes. You should review the agreement in detal, including the "fine print." You can also contact the lender and ask them to point out the term or provision allowing them to do this. Good luck.


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