Cars & Vehicles

Loans

878889

Top Answer

I presume that the person asking the question is referring to a loan with so called "levelized payments". Most mortgages have levelized payments which means that during the duration of the loan each month and each year you pay the same amount to your lender. Each payment to the lender consists of interest and principal payments. Via the principal payments you repay the lender the amount you borrowed. Interest is the compensation you pay for borrowing the money. This is the profit for the lender. Every time you borrow money you only pay interest on the amount that you owe the lender. When you first borrow money and have not paid back any principal, you have to pay interest over the entire amount you borrowed. After you have made several payments you have repaid part of what you have borrowed from the lender. The amount outstanding is lower than in the beginning. Hence the amount of interest you have to pay is less than in the beginning. Let's assume the principal is $100. In the beginning, the interest is calculated on the entire principal that is outstanding i.e., $100. When you pay $20 as installment towards repayment of the loan, $6 (say) goes towards interest component and the balance $14 towards principal repayment. Hence the principal outstanding is now $100- $14 = $86. The next installment is also $20. The interest component is 6% of $86= $5.16 (as against $6 for the previous installment). The principal component = $14.84. The outstanding principal now is $86 - $14.84 = $71.16 and so on. You can see that the interest component keeps decreasing while the principal component keeps increasing with time. The key is that the interest is calculated on the outstanding principal and hence varies with time.

๐

0๐คจ

0๐ฎ

0๐

0Charging 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).

The total value of a loan of 10500 at 3 per cent, which is paid back at the end of 5 years is10500*(1.03)5 = 12172.38So the interest on the loan is 12172.38 - 10500 = 1672.38The interest will be lower if the loan is paid back, bit by bit, over the 5-year period. The interest on the loan will then depend onhow often repayments are madewhether in constant amounts or nothow often the lender calculates the interest.The total value of a loan of 10500 at 3 per cent, which is paid back at the end of 5 years is 10500*(1.03)5 = 12172.38So the interest on the loan is 12172.38 - 10500 = 1672.38The interest will be lower if the loan is paid back, bit by bit, over the 5-year period. The interest on the loan will then depend onhow often repayments are madewhether in constant amounts or nothow often the lender calculates the interest.The total value of a loan of 10500 at 3 per cent, which is paid back at the end of 5 years is 10500*(1.03)5 = 12172.38So the interest on the loan is 12172.38 - 10500 = 1672.38The interest will be lower if the loan is paid back, bit by bit, over the 5-year period. The interest on the loan will then depend onhow often repayments are madewhether in constant amounts or nothow often the lender calculates the interest.The total value of a loan of 10500 at 3 per cent, which is paid back at the end of 5 years is 10500*(1.03)5 = 12172.38So the interest on the loan is 12172.38 - 10500 = 1672.38The interest will be lower if the loan is paid back, bit by bit, over the 5-year period. The interest on the loan will then depend onhow often repayments are madewhether in constant amounts or nothow often the lender calculates the interest.

No.What happens is that the lender will take your payments and use them to pay off the interest you owe on the loan each month. Any amount left over is used to reduce the principal you owe on the loan.When the loan is paid off in full for whatever reason, the amount that needs to be paid is the principal remaining plus interest for the current month so far.If your car is totaled and paid off three years into the loan, the interest you've already paid was to borrow the money for three years. Since you did borrow the money for those three years, you don't get any of the interest back.

Mortgages are typically "front-loaded." That means the interest is paid more aggressively in the beginning of the life of the loan than the principal. As the loan matures, less of your payment is devoted to paying the interest on the loan and more is applied to your principal balance. It is important to mark extra payments as being toward the principal, otherwise your mortgage servicer may apply any extra payments as an additional monthly payment instead of reducing the principal.

More often than not, a loan with no credit check will be what is referred to as a payday loan. A payday loan is an advance of money, or loan, on a future paycheck. It is considered to be a short term loan, because when the borrower receives the paycheck that the money was borrowed upon, the loan is to be paid back, with interest. Payday loans are unsecured, and carry a high interest rate.

Trending Questions

What is the closest us capital to Canada?

What is 8 divided by 2(2 plus 2)?

What is pokediger1s password on roblox?

Give me food and I will live give me water and I will die what am I?

How many times did saul try to kill david?

What's the most outdated thing you still use today?

What does kitty mean in Chinese?

What can be wasted but never bought?

Hottest Questions

Can you get sunburned in the shade?

What are the dog days of summer?

What is the toughest academic course according to the Guinness Book of World Records 2011?

Why do so many foods "taste like chicken"?

Who invented Lincoln Logs?

How did chickenpox get its name?

What is doomscrolling?

How did the Wiffle Ball get its name?

Unanswered Questions

WHAT IS THE EXPECTATION ON THE SUBJECT NSTP AND TO THE INSTRUCTOR AND CLASSMATE?

How do you transulate happy independence day in konkani language?

When two pieces of cui or other unclassified information are posted online together?

Is Jake penrod and guy penrod related?

What is the English of jhandian?

What is meant by spurl the flag?

How many undamaged rainforest valleys are left today on bc raincoast?