At last, spring finally is here in all its glory and wonder. There is, perhaps, nothing more life-affirming than witnessing the eternal unfolding of the seasons, the endless panorama reflecting the celestial pull of the universe. Indeed: What on our Earth can be more powerful than the very life forces of nature herself?
Only one thing I can think of: The ever-grasping greed of the financial "services" industry and its startling inventiveness in creating new ways to separate you from your hard-earned money while giving you nothing in return.
The latest example: an auto dealer financing add-on that promises to save you money by accelerating your car loan payments but, in fact, ends up costing you more. It's the equivalent of eagerly watching the snowbanks melt only to realize they were just covering up last fall's dog poop.
It's free, after all the extra charges
Which brings us to the recent case the Federal Trade Commission brought against National Payment Network Inc. and Matt Blatt dealerships, a string of New Jersey car lots. The firms teamed up to sell an auto-loan add-on product that promised car buyers it would speed up their paying off the loan and cut their interest payments. There was just one catch: The total fees would end up costing more than any actual savings over the life of the loan.
The product is a new twist on a lousy deal that's long been offered in the mortgage industry: the bi-weekly payment plan. The idea is that by making half of your monthly loan payment every two weeks, you'll end up making one extra payment each year. In an example from National Payment, biweekly payments on a six-year car loan for $30,000 at 8 percent interest saved the buyer $675 in interest.
But there was just one little problem: Add up the $399 enrollment fee charged by National Payment, along with a processing fee of $2.99 for each payment and a $25 cancellation fee that many car-buyers paid when they "canceled" by paying off their loans, and the total charges come to $818.68 which, math tells us, is not a savings of $675 but a loss of $143.68.
Spread your money-saving wings
Actually, it's a loss of the whole $818.68, because any consumer is free to put this strategy to work without the help of any middleman. Whether it's a car loan, a mortgage or anything else, you're free to pay your principal ahead of schedule any time you want. Just make sure, in the case of a mortgage, the extra money is applied to the principal rather than your escrow account. With auto loans make sure your contract won't penalize you for paying early.
Then you can either make a payment every other week, increase your monthly payment by one-12th, or set the money aside and make your extra payment at the end of the year.
Whatever approach you take, the extra payments will steadily erode your loan balance — without buying some money-wasting plan. Do it yourself and, just like opening day baseball on the radio and the first butterfly of spring, it's completely free.
Brian O'Connor is author of the award-winning book, "The $1,000 Challenge: How One Family Slashed Its Budget Without Moving Under a Bridge or Living on Government Cheese."