We just bought, but what is this "simple interest"?

[MickeyMamma]

We called today to arrange for buying points at SSR. So YEAY for that part.

But why do they tell you that the loan will be "simple interest"? When we went over the numbers with our DVC person, our monthly payments were a bit more than we had calculated. When we went through it with her she explained it - there is an APR to factor in.

So how is that simple interest then?

Anybody else get this from them?

Very puzzling and quite disappointing actually. I was excited about the purchase up until that point.

Ugh! I hope there are no other surprises in store.

 

[michaeln]

Simple interest is a type of loan.

Basically it is a regular fixed rate loan by which interest is not compounded on interest as with a credit card.

 

[kathleena]

These are all regular banking terms and are all regulated by the consumer lending laws. No different than getting an installment loan for a vehicle at your local bank or car dealership.

If you got a loan at your bank or used your home equity, you would have the same thing.

 

[luv2boys]

We get all our loans simple interest as there is no penalty for paying off early or making more than the monthly payment if we have a little more we can put in at the end of the month towards the principal.

 

[MickeyMamma]

Then maybe it is more of a definition issue.

In math class, simple interest was taught as you have a principle amount and you apply the interest once. There are different calculations that are used for compound interest (like in the case of an APR) which depend on the frequency of the compounding.

Very confusing, especially since our DVC person said that this was different that a mortgage loan. So if we pay more to the principle, does that mean that we have less interest? And if so, how is that different from a car loan where I am able to do that exact thing? Is the "loan factor" (what our DVC person called it) only applied for each monthly payment as is comes due then?