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Old 12-01-2012, 06:00 PM
MonkeyCMonkeyDo MonkeyCMonkeyDo is offline
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Quote:
Originally Posted by Weaselboy View Post
I'm not sure where you get this 70% number from, but it is nowhere near accurate. There is a certain amount of "front-loading" of interest due to the way interest is calculated on the outstanding balance, but it comes out nothing close to 70%... unless I'm missing something you are trying to explain.

Take a $50,000 five year loan at 4%. The first year is $9,218 towards loan principle, and $1,832 in interest. Or about 35% of the total $5,250 in interest for five years. So even in year one you are paying back far more toward principle than in interest.

There is a very linear drop in interest payments each month with a corresponding linear increase in principle payments. In this example about $3.00 a month difference on both sides of the equation.
Sorry I was basing that number on traditional loans of 7 %. The number is equivalent to the loan amount. So a 4% loan is around 40% and a 1% loan would be 10% etc. the point wasn't a broad across the board type of statement. We are currently in an insanely low interest period that won't last. It used to be getting 4% from a credit union for a car was a great deal when 7% was standard.

Sorry I wasn't clear before. Typing on iPhone makes a lot of problems.
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