Simple interest explained _ auto credit express blog what are the going rates for car loans
From time to time here at Auto Credit Express we handle questions from borrowers about their subprime simple interest car loans, so we thought we’d try to explain your possible interest as simply (pun intended) as possible using a somewhat “typical” loan scenario.
With a simple interest car loan you pay the highest amount of interest with the first payment and the lowest amount of interest with the last payment. Maybank interest rate for car loan 2014 Here’s an example: if you make your first payment on time, you would pay $372.79. Bank interest rates for car loans in india How Simple Interest Is Calculated
The 0.17 (interest rate) is multiplied by the current balance ($15,000) which would equal $2550. Interest rate car loan credit score 690 Divide that by the number of days in a year
(typically 365) and you have the daily interest rate ($6.99). Average interest rate for used car loan 2014 Multiply that by the number of days in the month (we’ll use 31), and you get that month’s interest charges – which in this case would be $216.69.
This means that $216.69 out of your $372.79 first payment – provided it’s made on time – would go towards interest, while the remainder of the payment – $156.10 would go towards the loan balance which is now $14,843.90.
The second month the same interest rate is multiplied by the new balance ($14,843.90) which now equals $2523.46 – which, when divided by 365, gives us a new daily interest rate of $6.91. Car title loans in parma ohio Given a 31 day month, this means that provided the payment was made on time, the interest payment would be $214.21, while the principal would be reduced by $158.58 with a new loan balance of $14,685.32.
With on-time payments, the pattern of ever-lower interest payments and ever-increasing principal payments continues until the loan is paid off after 58 more payments of $372.79. Car title loans in paducah ky Simple Interest Pros and Cons
The beauty of a simple interest loan is that if you decide to work towards paying off your car loan early, the entire additional amount is deducted from the loan balance. Bdo online car loan calculator This means not only are you reducing the principal amount even more, you’re also reducing the total interest charges on the next month’s payment.
For example, if, instead of paying $372.79 the first month you made a payment of $400, the new loan balance following that payment would be $14,816.69 and the interest charge on the next payment would be $213.90. Bpi online car loan calculator Admittedly this isn’t a huge savings at first, and could be difficult to do if you’re making weekly payments, but over time it will allow you to reduce the principle balance more quickly as well as lower the overall interest paid on the loan.
The downside of simple interest loans, however, is that if payments are made late, the opposite happens. Average interest rate for used car loan with bad credit Take our $15,000 loan as an example. Lowest car loan interest rate 2014 If the first month’s payment is 31 days late, twice the amount of interest accrues. Interest rate on car loan with 620 credit score This means that of that $372.79 payment wouldn’t even cover the interest charges of $428.42 ($6.91 times 62 days). Interest rate on car loan with 580 credit score In this case, none of the principle balance would be paid and there would be an additional $55.63 in interest charges added to the loan plus any late payment charges.
With most simple interest car loans, the penalties, additional interest charges and any loan balance owed is due at the end of the loan and can result in thousands of dollars in extra charges if monthly payments are consistently late. Interest rate on auto loan with 650 credit score The Bottom Line
There are a number of advantages to simple interest loans, not the least of which is the ability to pay one off sooner and reduce the interest charges without any penalty. Interest rate on car loan with 650 credit score The downside, however, is that additional interest charges and penalties can add up quickly if payments aren’t made on time – especially during the early stages of the loan.