Refinancing A Car Loan
- Karin
- lana98
- KirkL
- JenL_3
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» Karin - It is costing you plenty of money every month, when you make you
It is costing you plenty of money every month, when you make your payment. I don't think it would cost you that much on a used car on repairs.-A VW Bug is the most repair-free car, a used Toyota would be my second choice.
K.D.
-- posted by Karin
» lana98 - I brought this back up on top ....
Just because the links are so helpful, especially when I am hunting for a new car.Would someone care to comment/explain on :
"With a new loan, during the first few years you pay only on the interest and very little on the capital" .."
Here is the question I have in my mind:
Let's say I have two loans:
Loan A was $100,000 I have had this loan for 8 years. With all the payments and prepayments against the capital, I brought the loan balance now to $80,000.
Loan B was for $82.000 I have had this loan for 1 year I brought the loan balance down also to $80,000.
My question is:
When I run those two loans, CONCURRENTLY
Assuming the same interest rate and the same amount of time left on both loans
Do I pay more in Interest for the second one as for the first one?
Did I make some wrong assumptions?
Did I miss something?
Can such a situation exist?
Please you experts out there, help me
(I know , I know it's elementary to some of you, but not to me ... )
Thanks in advance.
-- posted by lana98
» KirkL - Lana Loans
Lana,Interest rates for cars are often different than for homes. It is better to get a car loan through a credit union because of this front loading in dealer car loans where interest is paid first then the car is paid off. It is legal, but not a good bargain. If you get a bundle of cash 2 years into a 5 year car loan and want to pay off the car, you often find you have paid almost the full 5 years worth of interest and still owe the principal so there is little advantage of paying off early.
Home loans and credit union loans use a simple formula that takes the outstanding balance every month and multiplies this by the annual interest rate divided by 12 to figure out the monthly interest payment. If you pay extra principal in a payment, then the principal is reduced by that amount and subsequent interest payments will be lower with a corresponding higher percentage of your payment going to reducing principal. What happens is you pay off your loan early when you make extra principal payments. I keep a spreadsheet for my home loan to track my principal balance as I pay extra.
So Lana, to answer your question, it depends on the type of loan. IF they are home loans of the simple type then it doesn't matter which you pay if they have the same rate, principal and time remaining.
This is good incentive to learn to use a spreadsheet or pay someone that does to analyse loans.
-- posted by KirkL
» JenL_3 - Car Loans
Lana - Here is a link that might help. It's from Smart Calc.com: Calculating Car Loans.......J.L.
-- posted by JenL_3
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