I have had several business loans and understand that this is not by any means typical.
I noticed that for a year my payments were not decreasing the principal on the loan. When I asked the bank why, I found out that at some point my payments were getting applied to principal only. Now I am paying interest off that was not paid for 6 months or so.
My banker states that he can change all the interest payments to principal payments. I am confused to why this would be. If I make all my principal payments first then would the bank lose a substantial amount of interest?
This has happened on 2 of the 3 loans I have looked at so far.
If they are willing to change all the payments to principal only, would this be beneficial to paying less interest ultimately? I assume there would be an interest account accruing somewhere that would need to be paid off at the end of the loan.
I understand that typically you have a loan balance that would include interest and principal. My balance owed did not change when I continued to make same payment? It gets applied to interest. The balance on the statement must not be a true balance. There must be interest owed above the balance showed but why would they do this to start with? They applied full payments to principle only first in order for interest to get to be more than several payments