Calculations on Interest of Bad Credit Car Loans
Capital Car Loans writes consumer articles pertaining to the auto loan industry focused on helping customers to better understand auto loans and how they work.
Calculations on Interest of Bad Credit Car Loans [Bad Credit Car Loans]
April 22, 2010, 1:54 pm
When applying for car loans, the one thing that the lender gives priority to is the credit score of the applicant. In case of bad credit car loans, the low credit score doesn’t matter much, but the circumstances which led to the condition do matter. For the borrower, the one thing that matters the most is the rate charged. It is a known fact that slight difference in the interest rate can mean hundreds of dollars (up or down) but very few people know the calculations which decide the interest charged on the bad credit car loans. A brief introduction to the calculations done is mentioned below:
For example, let the amount financed be 15000 dollars. The term of the payment can differ from three to six years. Let the term in this case be five years. This means that the borrower has to pay 3000 (250 a month) dollars every year to pay off the main finances. The interest rate can depend where the individual goes i.e. dealers usually charge a higher rate than the lenders and their mark up can be anywhere between two to four percent. In this case, let the rate of interest be 10 %.
In some cases, the interest rate reduces with the term of the loan and in some cases it stays constant. In case of changing rate, the rate can get halved when the loan amount becomes half. In case it stays constant, the total interest for the term becomes 1500 dollars. This becomes 300 dollars a year or 25 dollars a month. Therefore, in this case, the total monthly payment amounts to 325 dollars.
