I know what you mean about customer service in banking. They are saving money by not having employees and everyone gives up after arguing with a computer. What the CU failed to explain is what sounds like a Simple Interest Loan. You would be required to make monthly payments on your loan, and any additional payments made between the scheduled payments are applied to the principal on your loan. They will charge interest based on the unpaid balance until the next payment is received. Any time in excess of the predetermined payment schedule, usually 30 days, is considered past due and a late charge will be applied. Mortgages are also done in this way. With the old Add on interest loans you were able to make payments ahead of time and even skip a payment if you had paid ahead on you loan. Guess which way lenders make the most interest and income.