A trip to the bank

I was online reading over my LOC statement since I had gotten it. I haven't had a line of credit before so the process is new to me. I have had consolidated loans and a vehicle loan and was used to how the interest/principal worked on those.

The statement was BAFFLING. The interest being charged monthly came out of the chequing account it was tied to. Sometimes when I made a payment it said 'regular payment' and there was the interest/principal proportion of money distribution. Sometimes when I made a payment it said 'principal receipt'. One of the most recent payments was for $100. It showed up as 4 different transactions on the statement. Payment in, interest off, some to the principal then the payment went off and then in again. etc etc.


I tried to backtrack to see if everything balanced and the convoluted statement made me so confused I felt like an idiot.

I stopped by the bank today and was able to speak with a representative. She saw me without an appointment and together we dissected everything together. She was confused as well and made a couple internal calls to the higher ups.

So we learned that my loan  is an interest only loan. There is no set payment that is applied/comes out each month. There is monthly interest that comes out of the tied chequing account based on the balance. I can go in as often as I like and make whatever payment I like. I am to use the words "I would like to make a payment on the principal of my LOC'. This gives me a pure payment and no interest comes off. Otherwise the teller will think it is a regular payment, enter it as such and the 'interest/principal' portion goes into effect.

I did know this with my vehicle loan but for some reason never thought to ask if I needed to say this with the LOC too. I need to make sure the teller does it correctly. Not all of them understand the difference. I know with my vehicle loan I had to educate the tellers as well.

I was refunded the interest that was 'accidentally' taken off through teller error. The balance owing is all balanced now.

I also learned that when I try to pay online, the computer doesn't have an option for 'principal payment' and it thinks it is a regular payment, and thus interest comes off.

I really appreciated how well the lady was able to explain it to me. I was worried that I would either a) feel stupid for not knowing things or b) have her explain them and I STILL didn't understand it and I would feel stupider.

I am glad I ventured into my online statement. While I had a head whirling afternoon and a sleepless night trying to figure it out, I got the answers to my questions.

So many of these things, LOC, loans, CC's etc are all so much a part of our lives and there are infinite details that have to be figured out and learned by those of us who are not naturally familiar with banking, interest borrowing.