Interest

[carmogul]

I had someone ask me about how to calculate what their payment would be on a $25k loan @ 6.9% interest for 72 mos.,can't remember who as I deleted the pm, actually it may have even been on another board, lol..answer is $490.97........anyone wanting to know how to calculate simple interest loan's.

FormulaRINCIPAL X INTEREST (0.069) in the above x 6 (the number of years) add the sum to principal divide by 72...that simple

 

[Trainman]

I had someone ask me about how to calculate what their payment would be on a $25k loan @ 6.9% interest for 72 mos.,can't remember who as I deleted the pm, actually it may have even been on another board, lol..answer is $490.97........anyone wanting to know how to calculate simple interest loan's.

FormulaRINCIPAL X INTEREST (0.069) in the above x 6 (the number of years) add the sum to principal divide by 72...that simple

Most loans are not simple interest, they are usually compound interest, and require either compound interest tables or a financial calculator to figure payments and interest. Using your example : $25,000 x .069 =1,725 x 6= $10,350 + $25,000= $35,350 divided by 72 = $490.97. Using a financial calculator: $25,000 @ 6.9% interest for 6 years = $425.02 payment. The reason your example yields a wrong answer is that it does not take into account a declining balance. You do not owe the entire $25,000 for the entire 6 years. Each month the amount owed declines by a little bit, thus requiring less interest to be paid on the oustanding balance each month.

 

[carmogul]

Mr. Trainman,

If you are buying a auto and paying compound interest, either you got taken or you have extremely horrible credit

 

[carmogul]

and you must divide by the number of month's to get the monthly payment, I wasnt ask to provide a yearly payment

 

[65fastback2+2]

Most loans are not simple interest, they are usually compound interest, and require either compound interest tables or a financial calculator to figure payments and interest. Using your example : $25,000 x .069 =1,725 x 6= $10,350 + $25,000= $35,350 divided by 72 = $490.97. Using a financial calculator: $25,000 @ 6.9% interest for 6 years = $425.02 payment. The reason your example yields a wrong answer is that it does not take into account a declining balance. You do not owe the entire $25,000 for the entire 6 years. Each month the amount owed declines by a little bit, thus requiring less interest to be paid on the oustanding balance each month.

beat me to it. good call, sir.

 

[65fastback2+2]

the quick rule of thumb if you have decent credit is

$100 per month per $5000 financed for 5 years.

 

[Trainman]

Mr. Trainman,

If you are buying a auto and paying compound interest, either you got taken or you have extremely horrible credit

WRONG! No auto loans are simple interest from any lending institution. Has nothing to do with credit. The interest rate paid is all about the credit score. Anyone using your method to figure payments is getting TAKEN. I think when you are talking about a simple interest loan then you are usually referring to an "interest only" loan with a "balloon payment (usually principle)" at the end.

 

[carmogul]

LMAO...the example you use is not a simple interest loan, here is the compound formul a: A=P(1+R)n

 

[carmogul]

WRONG! No auto loans are simple interest from any lending institution. Has nothing to do with credit. The interest rate paid is all about the credit score.

I have been ripping off my customer's for year's, I can't believe I have'nt been put in jail

 

[Trainman]

and you must divide by the number of month's to get the monthly payment, I wasnt ask to provide a yearly payment

Reread my first post, I must have been editing when you responded. Hope that helps.

 

[Trainman]

LMAO...the example you use is not a simple interest loan, here is the compound formul a: A=P(1+R)n

Show me where the payment I figured is WRONG. I'll bet your payment amount of $490.97 is wrong and a ripoff.

 

[carmogul]

Most loans are not simple interest, they are usually compound interest, and require either compound interest tables or a financial calculator to figure payments and interest. Using your example : $25,000 x .069 =1,725 x 6= $10,350 + $25,000= $35,350 divided by 72 = $490.97. Using a financial calculator: $25,000 @ 6.9% interest for 6 years = $425.02 payment. The reason your example yields a wrong answer is that it does not take into account a declining balance. You do not owe the entire $25,000 for the entire 6 years. Each month the amount owed declines by a little bit, thus requiring less interest to be paid on the oustanding balance each month.

OK, MEA CULPA,

You are correct in that I neglected to account the declining balance(yes i use a computer at work) and i was doing this by old school pen and paper(cant believe how much i have forgot) however most auto loans are simple interest....I assure you of that!

 

[65fastback2+2]

I have been ripping off my customer's for year's, I can't believe I have'nt been put in jail

charging them full interest on the initial amount over the full term....ya, ripping people off lol

 

[65fastback2+2]

this is the correct formula for simple interest for declining balance

 

[ViperJeff]

Well....


If you don't include sales tax, down payment, or trade in cars.com has it at 425.02 for a 25k loan at 6.9%

 

[carmogul]

QUOTE FROM A WISE MAN: if ever you need to be corrected, merely post something incorrectly on the internet......:dontknow:

 

[ViperJeff]

Oh and I have to add, it's a hell of a way to sell a truck.

 

[carmogul]

this is the correct formula for simple interest for declining balance

you are correct, again i just quickly calculated something with pen and paper, first time in year's that i have.......i'll use my calc. or my comp. from now on :dontknow::dontknow:

 

[Trainman]

LMAO...the example you use is not a simple interest loan, here is the compound formul a: A=P(1+R)n

I used your example, which you called simple interest and arrived at the same $490.97 payment you did....so its your example not mine. I used the same figures you proposed in your example ($25,000 @6.9% for 6 years) to figure the actual payment $425.02. Prove that wrong! Using you payment of 490.97 for 72 months results in an overpayment in interest of $65.95 per month for 72 months, or $4,748.40......I would never buy a car from you if you think that is fair! I know the term "compound interest" is not exactly correct but I was trying to counter your term of "simple interest" in your original post. All is good!

 

[carmogul]

Oh and I have to add, it's a hell of a way to sell a truck.

lol, yeah im thinking anyone who was thinking of letting me finance on this board is thinking twice............