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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.

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โˆ™ 2005-04-26 22:14:42
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Q: Why is more interest charged at the beginning of a loan?
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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).


How can you show that more interest is paid at the beginning of a loan period than at the end?

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.


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 if the lender has charged more interest than loan allows what can you do?

Visit the lender and verify that this is actually happening. There is a difference between simple interest and compound interest based on the interest and the principle outstanding.


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


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.


What is the advantage and disadvantage of Loan Capital?

it will produce more interest


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.


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 www.asa.org.

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