Car interest

[tink20]

If you had a car loan for 12,000 with 25% interest

How much interest would you end up paying if the loan was 3 years?

or 5 years?

I want to see if I am coming up with the right numbers....tia

 

[Monte Cristo]

If you had a car loan for 12,000 with 25% interest

How much interest would you end up paying if the loan was 3 years?

or 5 years?

I want to see if I am coming up with the right numbers....tia

25% INTEREST????

I hope this is some math exercise for a class or something....not a real life question.

 

[golfgal]

25% INTEREST????

I hope this is some math exercise for a class or something....not a real life question.

I hope so too--if it is, heck, take out a new credit card and put it on there, it will save you money...

 

[cglaura]

3 years = 5,176.24 interest, final cost of car $17,176.24

5 years = 9,132.95, final cost of car $21,132.95

I used this:
http://www.thecalculatorsite.com/finance/calculators/carloancalculator.php

That is a crazy rate though.

 

[tink20]

No it isn't, my DD's BF who is 20 and has no credit established, bought a truck in Oct. It was 15,000 he put down 3,000 and financed 12,000. His parents couldn't cosign for him, so he went and did it on his own at a used car dealer. He has a great job, and has been paying the note which is 450 a month and an additional 600 a month.

But last night he ask me, why his principal was not going down. I'm just trying to help him, maybe see if he has enough credit established to refinance.

 

[ThreeBeans]

That is a typical rate offered by predatory lending companies or 'pay here' dealerships, who work with people who have had prior credit problems. These people typically cannot get a loan with anyone else, no matter how much money they earn or how stable they are *now*, so they're stuck with the rate. It's pretty awful, and, with the recent economic crash of 2008, many more people have had to deal with it.

 

[tink20]

3 years = 5,176.24 interest, final cost of car $17,176.24

5 years = 9,132.95, final cost of car $21,132.95

I used this:
http://www.thecalculatorsite.com/finance/calculators/carloancalculator.php

That is a crazy rate though.

Thank you, I'm not sure of the exact rate, he is suppose to bring over all his papers to me tonight. I am trying to help him refinance, if he can. He doesn't have bad credit, he just didn't have any credit.

 

[indimom]

Wow. I didn't even know a rate like that was possible on a vehicle. I hope you can help him refi somehow.

 

[Buckalew11]

25%?? That poor kid.

 

[ThreeBeans]

No it isn't, my DD's BF who is 20 and has no credit established, bought a truck in Oct. It was 15,000 he put down 3,000 and financed 12,000. His parents couldn't cosign for him, so he went and did it on his own at a used car dealer. He has a great job, and has been paying the note which is 450 a month and an additional 600 a month.

But last night he ask me, why his principal was not going down. I'm just trying to help him, maybe see if he has enough credit established to refinance.

Oh dear, this makes me sad, people taking advantage of a kid who didn't do his research

Explain for ANY loan that the principal and the interest are inversely paid off. At the beginning of the loan, almost ALL of your payment (did you say 450?) is going to the interest. So, 400 to interest, 50 to payment. It gradually switches, and by the end of a loan, almost all is going to principal and none is going toward interest.

Also, advise him to read his loan paperwork again. My guess is that he will have an early repayment fine if pays it off in fewer than the years agreed. These companies that offer these loans can be truly ethically impossible.

 

[ThreeBeans]

If possible, get him to switch his banking to a credit union. They are much more likely to offer him a reasonably rated loan.

 

[golfgal]

If possible, get him to switch his banking to a credit union. They are much more likely to offer him a reasonably rated loan.

 

[cglaura]

No it isn't, my DD's BF who is 20 and has no credit established, bought a truck in Oct. It was 15,000 he put down 3,000 and financed 12,000. His parents couldn't cosign for him, so he went and did it on his own at a used car dealer. He has a great job, and has been paying the note which is 450 a month and an additional 600 a month.

But last night he ask me, why his principal was not going down. I'm just trying to help him, maybe see if he has enough credit established to refinance.

If he is paying an additional $600 per month then the rates I posted probably won't be accurate, as the finance charge should be based on the balance. Extra principal would continually reduce the balance significantly and make the total finance charge much lower.

 

[tink20]

If possible, get him to switch his banking to a credit union. They are much more likely to offer him a reasonably rated loan.

I just called the credit union, that we used for my DDs car, they are open tomorrow. So, I think we will go and apply and see if he gets approved. DD wants me to cosign, but if they break up (they have been together 3 years) I could be stuck paying. I don't think he would do that, but I don't want to take that chance.

 

[tink20]

If he is paying an additional $600 per month then the rates I posted probably won't be accurate, as the finance charge should be based on the balance. Extra principal would continually reduce the balance significantly and make the total finance charge much lower.

He was confused because, when the bill comes, is says $0 due, which made me think that they are not putting the extra payment toward the principal.

 

[golfgal]

I just called the credit union, that we used for my DDs car, they are open tomorrow. So, I think we will go and apply and see if he gets approved. DD wants me to cosign, but if they break up (they have been together 3 years) I could be stuck paying. I don't think he would do that, but I don't want to take that chance.

DO NOT do this!!

He was confused because, when the bill comes, is says $0 due, which made me think that they are not putting the extra payment toward the principal.

Probably--usually on the stub there is a place to select to put extra toward the principal, is he doing that?

 

[Monte Cristo]

I just called the credit union, that we used for my DDs car, they are open tomorrow. So, I think we will go and apply and see if he gets approved. DD wants me to cosign, but if they break up (they have been together 3 years) I could be stuck paying. I don't think he would do that, but I don't want to take that chance.

Very nice of you to look after him like that. I like your thinking on the cosign...not a good idea IMO.

 

[maelstrom]

I just called the credit union, that we used for my DDs car, they are open tomorrow. So, I think we will go and apply and see if he gets approved. DD wants me to cosign, but if they break up (they have been together 3 years) I could be stuck paying. I don't think he would do that, but I don't want to take that chance.

DON'T cosign the loan for him!! It sounds like he's a good kid and all, but if they do break up, YOU'LL be stuck with that loan.

My fiance cosigned a car loan for his ex-girlfriend once upon a time so she could get a better interest rate. Needless to say, they broke up, and he still has that car loan following him around.

 

[ThreeBeans]

He was confused because, when the bill comes, is says $0 due, which made me think that they are not putting the extra payment toward the principal.

They aren't.

They are paying it to his NEXT payment.

He needs to call and say, "I am making this payment SPECIFICALLY TOWARD THE PRINCIPAL."

If he doesn't, he will end up paying on the loan exactly what he would have otherwise, no matter how fast he pays it off. He'll pay 21K in 3 years instead of 5 years.

This is all stuff that would have been in his loan paperwork, which is why it's so danged important to read before you sign.

I think kids should be required to take a basic life finances course before graduating high school to prevent this sort of thing.

 

[ThreeBeans]

DON'T cosign the loan for him!! It sounds like he's a good kid and all, but if they do break up, YOU'LL be stuck with that loan.

My fiance cosigned a car loan for his ex-girlfriend once upon a time so she could get a better interest rate. Needless to say, they broke up, and he still has that car loan following him around.

Yeah, definitely don't sign, unless you are willing and able to make those payments yourself.