Or does it just depend on the type of loan?
2007-01-19 00:06:08 · 6 answers · asked by Chris M 1 in Business & Finance ➔ Renting & Real Estate
I am paying the following month.
2007-01-19 00:10:19 · answer #1 · answered by Tom B 2 · 0⤊ 1⤋
It can vary by the loan specifics. Almost all loans follow the following.
Lets assume you are paying principal and interest and do not have an interest-only loan.
When you pay on the 1st day of the month you will be effectively making 2 payments wrapped into the one check you send in. You are paying the interest owned and you are paying down some of the principal each month.
The interest component is to pay for the interest you owe for the loan for the prior month. You are paying the interest on the use of the money. Like a credit card you pay interest on the outstanding balance so the interest is paid after or behind.
The principal is paid in advance. You pay this month principal that will be applied going forward. By reducing the loan balance (principal payment) you reduce the amount outstanding. Each day for the rest of the month the loan is smaller so you end up needing to pay less interest next month as the balance was less.
Your payments remain the same as the lower amount of interest that you owe means that more of your check is principal. That happens each and every month so by the end of the loan the check you send in to pay off the loan is almost all principal and very little interest.
I hope this is clear.
2007-01-19 02:02:18 · answer #2 · answered by Anonymous · 0⤊ 0⤋
You're paying for the previous month. The only time you pay for the current month, is at the closing table. For example, if your closing was on 4/15, you would see a line on the closing statement for "pre-paid interest" for 15 days (4/15 - 4/30).
2007-01-19 00:19:32 · answer #3 · answered by Anonymous · 2⤊ 0⤋
At closing you pay an amount of "per diem interest" that pays the interest due on the new loan from the day you go into title to the first day of the next month. Your first payment is then normally due on 30 days later. For example; you close your loan on January 15th, you pay 16 days of per diem interet bringing your interest paid to date to February 1st. Your first normal payment is due on March first. That payment is consitit\uted of February's interest and the March principal installment.
2007-01-19 02:46:37 · answer #4 · answered by Anonymous · 1⤊ 0⤋
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2016-12-12 15:08:14 · answer #5 · answered by Anonymous · 0⤊ 0⤋
you're paying for the previous month
2007-01-19 00:09:50 · answer #6 · answered by Mina 2 · 0⤊ 0⤋