How Does the Length and Interest Rate of My Loan Affect My Payments?

Nov 19, 2020

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Choosing the Right Loan for Your Budget

When shopping around for a loan, you’ll likely find that yournget different options. For example, one provider may offer you a five-year loanrnwith a 6{e443ec709150c73baf180d3d8e0a41d703fa022f47b2bb5516b57735b7c7f19e} interest rate. Another loan provider may offer the same loan for fourrnyears and at a 7{e443ec709150c73baf180d3d8e0a41d703fa022f47b2bb5516b57735b7c7f19e} interest rate. How does the length and interest rate of myrnloan affect my payments? Which loan do I pick? Here, we will explore how yourncan choose the right loan for your budget.

[ READ MORE: StudentrnCar Loans in Central Florida ]

Of course, the best scenario is to find a loan that offers the lowest interest rate. However, you must also keep the length of the loan in mind. While the first loan has a lower interest rate, it has an extra year to accrue interest. When loans like these seem so similar, the best way to figure out which one is right for you is to determine your monthly budget and how much money you’ll end up spending over the length of the loan. Assuming you make no down payments and no extra payments, let’s see which loan will end up costing you less.

Loan A:

$10,000 Principal

5 Years

6{e443ec709150c73baf180d3d8e0a41d703fa022f47b2bb5516b57735b7c7f19e} Interest Rate

= $1,599.98 interest paid over five years ($11,599.98 totalrnpaid for the vehicle)

*Customer would need to pay $193.33 a month

Loan B:

$10,000 Principal

4 Years

7{e443ec709150c73baf180d3d8e0a41d703fa022f47b2bb5516b57735b7c7f19e} Interest Rate

= $1,494.20 interest paid over four years ($11,494.20 totalrnpaid for the vehicle)

*Customer would need to pay $239.46 a month

As you can see, Loan A overs more flexibility for borrowersrnto pay back as there is less financial stress. The downside is that the borrowerrnwill pay a bit more in interest due to additional time on the loan. Wernrecommend this calculator so you can determine your payments with your loanrnoffers.

Looking for an affordable car loan? Do you have struggling credit? Contact us at OkCarz and we will offer you a loan that fits your budget.

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