What is a Simple Interest Loan?
Even when you buy a used vehicle in Phoenix, it’s possible to get a car loan from a finance center. The two types of car loans are compound and simple, usually calculated as a percentage as the principal amount. For a compound loan, you pay interest on the interest of previous periods. Simple interest loans are different because it only involves playing them on the principal.
But how does a simple interest auto loan work? Cactus Jack's Auto covers how to calculate the simple interest rate on a loan and other simple interest facts below!
How Does a Simple Interest Auto Loan Work?
Even for those with no credit, car loans are common around Mesa. Actually, they are great ways to improve your credit score if you’d like to. If you’re wondering how to calculate the simple interest rate on a loan, follow these steps:
- How to Calculate the Simple Interest Rate on a Loan for Daily Rates: You should have the annual interest rate for your car loan. Divide it by 365 to find the daily interest rate. So $10,000 balance on a loan with a 3% interest rate translates to an $0.82 daily interest rate.
- What is a Simple Interest Loan Payment Structure?:Surprise drivers will have to pay a down payment before starting monthly payments on a simple interest loan. When the loan is just beginning, most of your money will be going toward interest, while the final months of the loan are defined by paying off the balance.
What are Simple Interest Loan Benefits?
So, how does a simple interest auto loan work in terms of benefits? Simply put, simple interest loans save you money on interest. Interest is often the bane of many a driver’s existence, but simple interest loans provide you with an opportunity to pay it off if you follow a few tips:
- Paying more than the minimum: This is a good way to get the interest down on your loan.
- Paying more than once a month: Frequent payments are a good idea.
- Paying off the loan early: Some loans have penalties for early termination, so check before you decide to pay off the loan early.
Learn All About Loans at Cactus Jack's Auto
At Cactus Jack's Auto we’re always ready to help Phoenix drivers with car buying tips for their next vehicle. Research our buy here pay here program to find out how you can best secure a car loan. If you’re still asking questions like, “What is a simple interest loan,” go ahead and contact us today!