How is my payment divided between principal and finance charges?
Payments are applied in accordance with any applicable law. Absent any applicable law, payments are applied first toward finance charges and to other amounts owed, including any late charges, principal, or other fees. When the principal balance is reduced with a payment, the daily per diem will also decrease. Therefore, the amount of finance charges that accrue daily will decrease each time a payment is made, as long as the principal balance is reduced with each payment. This is why the amount of finance charge paid at the beginning of a contract is higher than the amount paid at the end of a contract.
Related Questions
- Should both gross indebtedness (principal plus finance charges) coverage and net payoff indebtedness (principal only) coverage be allowed?
- If only the minimum payment shown in the EscrowCard statement is paid promptly, what are the finance charges?
- How is my payment divided between principal and finance charges?
