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Interest is computed on the remaining balance monthly..If you have a credit card balance and pay exactly every 30 days, you will see that the interest charged is reduced by a small amount every month.

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โˆ™ 2006-04-03 14:16:30
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Q: How can you show that more interest is paid at the beginning of a loan period than at the end?
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Why is more interest paid at the beginning of a loan period than at the end of the loan period?

Charging interest is the method by which a lender profits from loaning money to a borrower. The lender will set the terms of any loan to their advantage. They obviously want to get paid first and get paid the most. The balance of a loan is typically higher at the beginning of a loan, and interest will be charged on the balance. So as a person makes payments on the loan typically he/she will be making a payment consisting of part interest and part principal. As the person pays down the loan the interest that is calculated at the compounding period will be less because the principal amount has been reduced. For example, a person has a $1000 payment, at the beginning of the loan the payment may be broken down as ($900 interest and $100 principal), on the last payment of the loan the payment of $1000 may look like ($950 principal and $50 interest).

Why is more interest paid at the beginning of a loan period that at the end?

Because your balance is high at the begging of the loan so then the balance goes down as you pay money so it comes to be less

Why is more interest paid at the beginning of a loan period than that at the end?

more interest is paid at first to secure the loan. they want to get their part of the money back as quickly as possible. what happens to the value of a new car the instant you drive it off the lot? Financial institutions are in it to make money not lose

Why is more interest paid in the beginning of a loan than the end?

There is more princple left on the loan for the interest to be calculated off. If the bank will let you. As to make payments on the princle. This will lower the amount of interst that is calculated in the future.

What is the advantage of an interest-only loan on your house?

The advantage of an interest only loan is that for a predetermined period of time you only have to pay the interest portion of your loan along with taxes and insurance. You do not have to pay on the principle of the loan. This option is best for people who expect to be making more money when the predetermined period is over. The more important question is what are the disadvantages of an interest only loan? Basically you can run across a few problems. The first one is that you are not paying down the principal of the home. That means the amount you bought your house for is still the amount you owe on it after the predetermined period is over. Second, you have to be prepared for the increased monthly payment after the interest only period is over. As mentioned above this type of loan is best for those individuals who expect to be making more money after the interst only period and also for those individuals who can take the difference they would have been paying monthly if the loan were conventional and invest it for the predetermined period.

Why is more interest charged at the beginning of a loan?

The interest is based on the amount owed, therefore as payments are made the balance drops as does the interest amount (not the rate). So the interest is higher at the begining, because more money is owed at the begining.

What is adjustable rate riders and interest only periods?

An Adjustable Rate Rider is a supplemental mortgage document related to your Mortgage Note. The Rider spells out the rules that determine how and when and by how much your variable interest rate changes. Only ARM loans, or adjustable rate mortgages, have an Adjustable Rate Rider. An interest only period is the beginning of an interest only loan where the borrower is only required to cover the interest charges on a mortgage, but none of the actual loan balance. The borrower may CHOOSE to pay more than just the interest, but if they don't the balance will remain the same. The interest only period may be as long as 10 years.

Why is there more interest paid at the beginning of a loan period than at the end?

In a simple interest loan, you are paying interest on the amount of money you have borrowed in each payment period. When you make a payment, a certain amount of it goes to repay the loan, reducing the principle. In the next payment period, your interest is being calculated on a smaller amount borrowed. In the first payment, you are paying interest on the entire amount borrowed. In the next payment, you are paying interest on the amount borrowed minus the principle amount from the first payment. That's why paying extra principle early in the life of a loan can make a big difference in the time it takes to pay it off. In a 30 year home mortgage for example, in the first year the principle will be reduced by about the amount of one month's payment. If you make an extra payment toward the priniciple equal to one month's payment, you will have effectively gained an entire year in the retirement of the loan.

What is an example of an inexpensive loan and a medium price loan and a expensive loan?

An inexpensive loan is one with a 0.12 percent interest rate. A medium price loan would be about a 6.5 percent interest rate. Lastly, an expensive loan would be one with an interest rate of 15 percent or more.

What is the interest rate on an unsecured personal loan?

The interest rates on an unsecured personal loan vary greatly from loan to loan. If your loan is through a Credit Union, it can be as low as 1.9%, whereas if it is a high-risk loan secured through a private business, the interest rate could be as high as 30% or more.

Does an unsecured personal loan let you pay more interest?

An unsecured loan is risky for many reasons. You may pay more interest, or if it is with someone you know maybe no interest. Read the terms and conditions you agreed to.

Can a lending company charge interest and fees that are higher than your monthly payment?

yes, it is possible. It all depends on the amount of loan and the period of repayment of loan. In order to get low monthly installments make the time period of loan repayment more. In this way though you have to pay more amount but you will able to pay that amount in your current monthly income.

What is the advantage and disadvantage of Loan Capital?

it will produce more interest

What is the going interest rate for a VA Small Business Loan ?

The interest rate on a VA small business loan is set on the basis of the prime interest rate. For a loan of $25,000 or less 7 years or less Prime + 4.25%, and for $50,000 or more 7 years or more Prime + 2.75%

Where can I find information about student loan interest rates?

Student loan interest rates tend to vary depending on the type of loan. More information is provided by American Student Assistance, which can be found at

Can you consolidate if you only have one student loan?

Likewise, I received tons of offers in the mail to consolidate my loans for a lower interest rate. Well, I only had ONE large loan. I was told, NO. I think that's because they take an average of your current loan interest rates to determine your new interest rate...... or it was the lowest interest rate of your current rates. Either way, if you only have ONE loan, you only have ONE rate to average. Anyway, what I ended up doing was refinancing the loan & ended up paying less monthly..... but actually higher interest & more dollars & time in the long run...... a really temporary fix for an enduring problem, huh? :( ADDED: it is indeed the weighted average. By consolidating your one loan you got a longer repayment other words...more interest. Consolidation refers to the fact that to consolidate more than one loan.

If you make your house payment later than the first of the month are you paying more interest?

You pay interest on the outstanding loan balance. The longer you have the loan combined with the size of the loan determines how much total interest you pay. When exactly you make a payment is less of a factor. If you make a double payment every month you will be paying a lot less interest over the life of the loan. If you are asking if paying the loan late (after the monthly due date) costs extra then I would suggest you check the loan documents. Most loans have a short grace period and then a penalty. That penalty is not interest so you would not be paying extra interest. The balance of the loan would be higher for more days so you would pay slightly more total interest in addition based on when exactly the loan payment is received. Tip: If you take out a 30 year loan, fixed interest, you can take a full year off the loan if you make 1 extra payment in the 1st month and the extra payment is applied to the outstanding principal owed. You can save what amounts to a year of interest by making 1 extra payment early in the life of the loan. Create a spreadsheet or use a financial calculator if you want to see how the loan changes when you pay down the principal early. Or post a question and get a detailed answer.

How does your payment change between a 30 and 40 year mortgage?

A payment on a 40 year loan, if it is a fixed-rate loan, will be smaller, provided all other factors like loan balance and interest rate are the same. If you are talking about an adjustable rate loan, well, your payment will vary on your interest rate more than how long the loan term is. A 40 year loan will pay-down your loan slower, meaning at 10 years, you'll owe more on a 40 year loan than a 30 year loan. You may also pay more towards interest on a 40 year loan.

What are the effect of resistance exercise on the body?

Generally, these loans require oralltecal that can be either your home or some costly property. But sometimes, you can get these loans as an unsecured personal loan. But they charge high interest rates.When going for a debt consolidation loan, you should consider some important factors. They are: cost of taking the loan, the annual percentage rate (APR), period of the loan, and the total amount borrowed. Ensure that the debt consolidation loan charges a lower interest rate than the rate for your current loans. Interest rates are usually decided by factors like loan amount, loan terms, and personal details.If the repayment period of debt consolidation loan is longer, you can end up paying a lot more in interest. This makes it vital to compare the interest rates and repayment periods of various lenders. Debt consolidation calculators offered by various financial organizations can be used to achieve the same.

How much interest is added on to a mortgage loan?

There is no one way to determine how much interest will be added to a mortgage loan without knowing the specifics of the loan. The amount of interest could be as low as 2.7% or 5% or more. The bank, type of mortgage and credit history can all play a part in the interest rate.

Will you pay more interest on an unsecured personal loan than a secured one?

The amount of interest you pay depends on the institution that you borrow from. You will usually pay more on an unsecured personal loan than a secured one.

What is a loan?

When you have something and you give it to someone else to use for a time, you are 'loaning' it to them. Thus 'a loan' is the term used to describe an amount of money lent to you by a bank. You will be expected to pay this money back together with a little more money (called interest) over a fixed period that you will agree with the bank. When money is given to you with the expectation of repayment with interest on it. A loan is the same thing as "borrowing" or "to have a lend of". You can loan items such as books or cash.

Getting Auto Loans For Less?

Be weary of comparing just the interest rates when you are comparing auto loans. It is certainly an important factor, but it is not the only factor worth considering. The important thing to keep in mind is how the total interest is affected by a combination of the interest rate, the term of the loan, and the size of your monthly payments. A relatively low interest rate will still end up costing a great deal in interest rate if the loan is paid off over a long period of time. A low interest rate also does not necessarily mean that your monthly payments will be low, especially if the term of the loan is short. Instead of comparing interest rates directly, compare how interest rates affect the loan as a whole. Some people are more concerned about their monthly cash flow, and therefore think about the size of the monthly payments more than anything. Others are more concerned about their long term savings, and look at the total amount of interest they pay on the loan. Either way, interest rates play an important part in the loan, but they are not the only variable.

Can business charge interest then add more interest the following month if not paid or is this charging interest on interest?

It is called compounded intrest, and it is legal. If you borrow $100.00 at 20%, your total debt will be $120.00 at the end of the first period. If you let that $120 ride for another period, at 20%, then you will owe $144.00 at the end of the second period. This is how credit card companies and mortgage corporations screw the consumer. There is no such thing as a simple-intrest loan in business.

Where can a low rate interest loan program be found?

Low rate interest loan program can be found in your local loan programs buildings. It's also possible to contact some of these companies online to know more about it.