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How would the total payment on a 5-year loan at 3 percent annual simple interest compare with the total payment on a 5-year loan where one-twelfth of that simple interest 0.25 percent is calculated?
Wiki User
∙ 11y ago
In the first case you will get 1+3%*5 = 1.15 times the capital.
In the second, you will get 1+0.25%*5 = 1.0125 times the capital
Wiki User
∙ 11y ago
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Converting the flat rate of interest to diminishing rate and vice versa takes into account the payments the loan entails. Flat interest rates reflect the amount of interest you will pay if no payments over time are made. Diminishing interest rate factors in that after a payment is made, your over all loan balance will be less, there for your next payment will have slightly less principal balance for interest to be calculated on.
Why is it unwise to only pay the minimum amount on a credit card?
Only paying the minimum amount (depending on how much you owe, your interest rate, and how your minimum payment is calculated) will take you years to pay off in which time it is most likely that you will have paid more in interest than you owed to begin with. For example, $5000 balance owed with an interested rate of 20%, with a credit card whose minimum payment is calculated: interest rate + 1% of balance, therefore a minimum payment of $133.33, will take you over 23 years to pay off and by that time you will have paid over $7,700 in interest alone!
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Calculate monthly payment?
the monthly payment is calculated based on the following: 1. loan amount 2. loan interest rate 3. term of loan Use the easy loan calculator below with your own figures.
Why is there more interest paid at the beginning of a loan period than at the end?
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