First, let us say you borrow 4000 for one year at 20% interest. With bank interest rates to be applied throughout the year on a daily, or maybe a monthly basis. For example, they do what you have left to pay, and then calculate one days interest on that amount. As your balance decreases, reducing the interest every day. This makes it very complicated to calculate, as it is necessary to consider how to calculate the interest paid before.
But the situation is much easier with auto loans! This is, unfortunately, the only good news. If the interest rate is 20%, and the amount borrowed is 4000, then the interest for the year is the 800th Simply. No bad news, if you look closely, is that there is no credit given to the amount of loan that is repaid. Each month interest is the same.
This situation is even worse as the term loan was increased. In our example, the burden of interest over three years could be 800 per year or 2400 total. Yes, the Bank of calculating the interest in the everyday way, it is reasonable to expect that after two years at least half of the loan would be repaid, and interest each day or month is halved.
There is another way to get an auto loan more money from debtors. People giving out car loans are usually happy to pay it early if you want. This is not always the case with traditional bank loan, and if you are likely to be able to pay the extra amount you should check with your lender that you are allowed.
So why auto loan lenders happy to pay off early? Yet it is down to a simple way they calculate interest. Since interest is calculated on a day and apply to your loan, whether you pay off the loan within the agreed time or half time, they still receive the same interest. In fact, if you pay off early, then they themselves have extra money available for lending to another lender. Thus, there is no reason for them to refuse the payment. However, with a traditional loan if you pay off early, you're no longer paying interest and the lender loses.
With this initial calculation of interest, paying off a car loan is much easier to calculate than a traditional loan but the lender ends up charging you a lot more interest over the loan and there is no saving if you pay early. Before you sign on the dotted line for a new car loan, ask your friendly bank manager if they have any convenient loans available and what it would cost.