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Archive for the ‘Money Mart Broadway’ category

Your car or truck loan may advertise low interest rates, however the genuine rate you’re investing could be two times as high.

A typical point of confusion, with regards to loans, could be the different ways interest percentage is calculated. This is especially valid with regards to car loans – if you tally the total amount invested at the conclusion of the mortgage, it seldom matches the advertised price.

What Makes Car Loans Interest Rates More Costly Versus They Appear?

With regards to car and truck loans, the reported rate of interest is different then the true rate of interest (called the Effective interest, or EIR). The reason being car and truck loans always utilize what’s called a Flat speed Method.

The amount of interest that you pay is fixed, based upon the original principal with a Flat Rate Method.

  • You are taking out a motor car finance of S$84,000
  • T he promoted rate of interest is 2.78% p.a .
  • The mortgage tenure is 7 years

Utilising the Flat speed way of calculation, the attention you spend is founded on the initial principal of S$84,000 each month. Therefore the interest that is total over 7 years is:

2.78% x S$84,000 x 7 = S$16,346.40

Now, included with your initial loan of S$84,000, the amount that is total need certainly to repay = S$100,346.40

This works off to S$100,346.40 / (7 x 12) = S$1,194.40 each month for 7 years

How Can This Vary From Other Loans?

For some other loans, such as for example mortgage loans and personal instalment loans, the interest is calculated on the basis of the outstanding stability each month. This means you will also progressively pay less interest as you pay down the loan (a process called amortisation. Read more »