the unpaid principal balance of the loan using a APR of 12.55%. The interest starts from day one. I am not concerned about the high interest rate considering I will pay this off in two years. My question is : Is this simple interest contract a normal type of contract for a auto loan or am I getting hosed? Any ideas or thoughts on this matter?
I was offered a simple interest six year auto loan. (amount of finance charge is calculated each day based on
Simple interest is the basic form of interest claculation and you can't go wrong with that. The interest is calculated (or compounded) on a daily rate in your cased based on the outstanding balance. Years ago there was an interest rate calculation called %26quot;the rule of 78%26quot; in which the interest was squeezed intothe beginning of the loan. It that case if you paid it off after a couple of years you would have already paid almost all the interest, even if it was a 4-year loan. The loan you have is the most favorable way to compute interest, the only better option would have been if the interest had been compounded monthly instead of daily.
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