Car financing question???
Lets say a car costs $5,000 and the dealer is going to finance a car loan for you with an interest rate of 24%. If you pay the monthly car note every month for 60 months, you will have paid about $8,000 which means $3,000 of that is interest. Lets say your monthly note is $130 but some months you pay $500......will that lower the amount of interest you pay in the end? I guess to sum it all up I am asking: If you pay your car loan off quicker than the 60 months, will the interest be less?
- 1 decade agoFavorite Answer
The short answer is yes.
The longer answer is to ensure that you have a "SIMPLE INTEREST" loan and NOT a "Rule of 78's Precomputed" loan.
If it's simple interest, that means that the interest is calculated each month on the remaining balance. So if you pay it down faster, you automatically save money in interest.
If it's a "Rule of 78's," that means that the interest is calculated ahead of time and while you'll save money if you make the final payment before it's due, you pay the same interest during any month that you have a balance regardless of whether you've paid in advance or ahead.
Bottom line ---- pay off any loan (car or otherwise) as quickly as you can. Interest is only putting money in someone else's pocket. And, think about it, you're buying a car. It's going to go down in value every month that you own it. And, if you are paying interest on it, your money is worth less every month too. NOT good math!!!
- Anonymous5 years ago
You can't assume that there is just the one type of loan. Reading the contract would specify what you can and cannot do and since there's all kind of different agreements one can go into, your question is impossible to answer..
Car financing question??? -
Lets say a car costs $5,000 and the dealer is going to finance a car loan for you with an interest rate of 24%. If you pay the monthly car note every month for 60 months, you will have paid about $8,000 which means $3,000 of that is interest. Lets say your monthly note is $130 but some months you pay $500......will that lower the amount of interest you pay in the end? I guess to sum it all up I am asking: If you pay your car loan off quicker than the 60 months, will the interest be less?Source(s): Potential car loan: http://car.insuranceaskingprice.com/CarLoan.html
- aric_714Lv 41 decade ago
Lol I love how you try to make it sound like it's not what your doing. The answer to your question is NO. Like you said the loan was $8000 and you have to pay ALL of that no matter how early you pay the car off. Once an amount is financied you are responsible for all the interest no matter how quickly you pay the car off. Sorry, but it's a good question.
- 4 years ago
Wow, did you get taken! And no, except the mortgage has been paid off IN FULL, now not simply the long-established rate of the automobile paid, you do not legally possess the automobile so you'll be able to promote it - you agreed to the opposite expenditures, in writing I'm certain, so you are dependable for the ones additionally earlier than you are off the hook. I'm certain the finance enterprise has a lein at the identify, so that you cannot promote it with out paying it off. And the automobile's usually now not valued at at any place close the stability that you simply owe, so they do not desire to repossess it if they've a danger of truthfully getting a colossal element in their cash from you. Good good fortune.
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- Anonymous1 decade ago
Man you must have lousy credit. Never pay that much interest on any loan. On most loans you pay the interest before you even make a dent in the loan. Instead of making larger payments put the extra in the bank until you can save enough to pay the loan off early. That way you will save money.
- mtchndjnmtchLv 61 decade ago
You sometimes have a penalty for early pay off, But check it out with your loan officer. If you have a rate of 24 % you must be a bad risk. Your total loan may be set in stone.
- BarcadcadacadaLv 61 decade ago
Yes, in most cases the interest will only be charged on the reamaining balance, so the more you pay the less the interest.
On the other hand any dealer that is charging you 24% is ripping you off something terrible so it's hard telliing what they will do.
- 1 decade ago
yes, it should be, but that's now always the way it goes, my loan is 3 months ahead and i still paid about 40 to 50 dollars a month in interest. times that for 6yrs,$3240.00 aver. on 8.5%, yes it will be paid off early ,but I see the same interest
- Jesse RocksLv 41 decade ago
If you pay more, SPECIFY that it is applied towards princ....that makes the interest less...plus it's paid off a little more quickly.
errr....but NEVER pay anywhere remotely CLOSE to 24% interest.Source(s): Ex-banker
- Anonymous1 decade ago