Loan Values
Personal loans are one way to open up the door to huge projects, like building a new deck, or installing that pool you’ve always wanted…
Sometimes you can even use them instead of a car dealership’s financing price, saving you on interest.
Because personal loans aren’t tied to any specific thing, you can use them on virtually anything.
But there’s one thing that’s easy to lose sight of once you’re staring $20,000 in the face – the interest.
Yes, you have to pay back the $20,000, but you’ll also have to pay interest on top of it. There are several factors that affect how much interest you’ll be paying:
- The principal: How much you borrow (i.e. $20,000)
- The loan term: How long you’re paying your loan off (i.e. 7 years)
- The repayment schedule: How often you’ll be making payments towards your loan (i.e. biweekly)
- The interest rate: How much interest you’re being charged (i.e. 4.99%)
Generally speaking, the more often you pay off your loan and the shorter you take, the less interest you’ll pay overall.
When making regular payments, interest charges become a little bit more complicated because of compounding.
If you’re looking to pay off a loan of $20,000 over 7 years, and you get an interest rate of 4.99%, you’ll be looking at monthly payments of $282.58. Once it’s all said and done, you’ll have paid $3,736.72 in interest.
Shortening that to 5 years will save you over $1,000 in interest, while paying less than $100 more in monthly payments. Not bad, right?
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