Posts tagged: interest

How Is The Interest Calculated On Car Loans or Signature Loans?

Just like any other loan, your car loan will have a principal amount. This is the initial amount borrowed to purchase the car. You may also have a down payment that you make on the car as well.

Your down payment might be cash from your savings account or even a check from the car dealership for your trade-in vehicle. The principal amount of the loan is the only amount you will have to pay interest on.

Let’s say you are looking at a new car that costs $20,000. You trade in your old car for $4000 and you have another $4000 cash as a down payment. Your new car loan will only be for the amount of $12000. This is the amount you will need to pay interest on.

Interest is calculated from the amount of the loan, the length of the loan, and the interest rate of the loan. You should always sign for a fixed interest rate.

The length of the loan is probably dependent on your current income. Can you afford to pay the car off in two years or will it take five, like most new car loans run for.

Let’s look at how the length of the loan will affect your monthly payments. You can choose to pay off the car in just two years and make hefty payments each month. You could also pay the car off over five years and make small payments each month, but for a much longer time period.

Long term loans will tie up a person’s budget, keeping them from paying off other debts they may have or even from saving. When it comes to vehicles, or other items that decrease in value over time, you should consider using the shortest length of a loan possible.

If you want to know exactly how interest is calculated, you should use an online loan calculator. As you look at your interest results, you will notice that at the beginning of your loan, you will be paying more interest than principal, and that will change slowly over time.

If you are trying to avoid interest, you can make extra payments or pay down additional principal at any time through out the loan. Even paying off your loan six months early will save you a few dollars.

When you are taking out a loan for any reason, you should make sure there are no penalties for early pay off. You wouldn’t want to pay a charge for paying off your loan earlier than planned.

It is also important to get a good interest rate on your car loan. If you will need to take out a loan for five years, that half a percent of interest will make a big difference over that amount of time.

Always remember that the best way to get the best interest rate is to have a great credit rating. This is how lenders decide which interest rate you deserve.

Interest on car loans can make a big difference in the length of the loan and the monthly payment. Always consider saving your money over time so that you can avoid borrowing more than your budget can afford.

How Can I Minimize the Interest I Pay on My Signature Loans?

Wouldn’t it be great if we could all just pay cash for college, cars, and even houses? Well, that would be great, but instead we have the ability to borrow money to pay for these big ticket items.

When we borrow money to pay for a house, we take out a mortgage loan. not only do we get to pay back the amount we borrowed, but we owe much more in interest. In fact, as you begin to pay off your loan, you will notice that most of your payment is simply paying for interest.

A small amount is being put towards the principal, or the original amount of the loan. Many people wonder how they can pay off the principal amount of the loan sooner than originally planned and there is a way.

When trying to pay as little interest as possible, there are a few options to look at. You might consider talking to your lender about making bi-weekly payments in stead of monthly payments.

You lender will have you send in a payment every two weeks, instead of every month. This may not seem like much of a difference, but with this set-up you will end up making 13 payments instead of 12 over the course of the year.

Some lenders may require a fee to set up this system. In the long run, you could end up paying off your 30 year mortgage loan in around 24 years instead. If your lender is not willing to allow this, you can simple send in an additional payment sometime during the year.

Another option is to set up a system similar to those that are trying to eliminate all kinds of debt. In addition to making at least the minimum payments on all of your debts and loans, you will need to put every extra penny towards your loan with the highest interest rate.

A budget is a great way to look at your income and your spending habits. By creating an actual budget you can decide which areas can be cut out or changed to allow extra loan payments to take place. You may be able to cut down on entertainment and eating out, and be able to make that extra payment for the year.

If you enjoy a holiday bonus or a tax refund, you can apply that money directly to your loan as well. Always remember that when you make an additional payment to your lender you write “apply to principal” so that your extra cash won’t be held until your next payment is due.

If you are taking out a mortgage loan you should consider making a down payment or paying points. This means that you can eliminate paying interest by paying for it up front. Some lenders might require you to pay a certain percentage of the loan in cash, also known as points.

You should always consider starting a savings account, whether it be big or small it is always a good idea. By using your savings in stead of borrowing money, you eliminate paying interest altogether.