Tuesday, 8 July 2014

Type of Interest Charged by Car Loans - Simple or Compound

When you get to access zero credit car loans, you have to look for the type of interest they charge on it. Many car loans are there, which charges simple interest and not compound interest. The compound interest charges on your principal and the interest on it accumulates whereas the simple interest accrues just on your principal amount.

Online Car Loan

You pay on the interest on your principal amount when the loan charges simple interest, thus making you end up paying less than the compound interest. For example, you took a loan of $10000 that you need to pay within five years, quite typical for car loans. In addition, if the rate of interest charged against it were 5%, then the final amount would be –

Car Loan

Compound interest (compounding monthly): $12,833.59

Simple interest: $11,322.74

So people if you are able to avoid paying interest on your interest, you are going to save more than $1500 during the term of the loan. However, that does not mean you have to compel yourself to take a loan. You have other options too, such as amortization.

Bad Credit Car Loan

However, with time car loans have started to work on the fair share of car loan interest. This make the car loan more affordable these days.

No comments:

Post a Comment