Question about financing?

Question

OK here's my question.
If I agree to borrow money from a bank ($10,000) and they say it's 20% of interest for a 60-month term. That means after 5 years the money I have to pay is $12,000. But the thing is what happens if I've been paying for 2 years and now I have the rest of the money and want to pay them off. How will they calculate the rest? The total should be $11,000 (the money I've been paying for 2years + the rest = $12,000) or less than $12,000 ?
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make it clear
$12,000 / 60 = $200/mo
so for 2 years, I've paid : $200 * 24 = 4800
Now, after 2 years I have the money and want to pay it off, so the rest should be $12,000 - $4800 = $7200 or less than $7200 ???

Answer 1

I have never heard of a 20% at 5 years/60 months... interest is almost always expressed in APR, or annual interest rate. This would mean that you pay 20% per year on the outstanding balance. The exact amount of your payment will depend on the amortization method.

Let me give you an example:

20% APR compounded monthly (at the end of the month)

month 1: balance = $10k, APR = 20%, monthly = 20%/12 = 1.67% interest = balance * monthly = 10k * 1.67% = $166.67

so everything you paid over $166.67 would come off principal. Continuing this pattern and assuming you paid $200 per month you would never pay it off, so your minimum payment will have to be something like $264.95 per month, and would disseminate as follows:

month 1: balance = 9901.71666666667 interest = 166.666666666667
month 2: balance = 9801.79527777778 interest = 165.028611111111
month 3: balance = 9700.20853240741 interest = 163.36325462963
month 4: balance = 9596.9286746142 interest = 161.67014220679
month 5: balance = 9491.92748585777 interest = 159.94881124357
month 6: balance = 9385.17627728873 interest = 158.198791430963
month 7: balance = 9276.64588191021 interest = 156.419604621479
month 8: balance = 9166.30664660871 interest = 154.610764698503
month 9: balance = 9054.12842405219 interest = 152.771777443479
month 10: balance = 8940.08056445306 interest = 150.90214040087
month 11: balance = 8824.13190719395 interest = 149.001342740884
month 12: balance = 8706.25077231384 interest = 147.068865119899
month 13: balance = 8586.40495185241 interest = 145.104179538564
month 14: balance = 8464.56170104995 interest = 143.10674919754
month 15: balance = 8340.68772940078 interest = 141.076028350832
month 16: balance = 8214.74919155746 interest = 139.01146215668
month 17: balance = 8086.71167808342 interest = 136.912486525958
month 18: balance = 7956.54020605148 interest = 134.778527968057
month 19: balance = 7824.19920948567 interest = 132.609003434191
month 20: balance = 7689.65252964376 interest = 130.403320158094
month 21: balance = 7552.86340513782 interest = 128.160875494063
month 22: balance = 7413.79446189012 interest = 125.881056752297
month 23: balance = 7272.40770292162 interest = 123.563241031502
month 24: balance = 7128.66449797032 interest = 121.206795048694
month 25: balance = 6982.52557293649 interest = 118.811074966172
month 26: balance = 6833.9509991521 interest = 116.375426215608
month 27: balance = 6682.9001824713 interest = 113.899183319202
month 28: balance = 6529.33185217915 interest = 111.381669707855
month 29: balance = 6373.20404971547 interest = 108.822197536319
month 30: balance = 6214.47411721073 interest = 106.220067495258
month 31: balance = 6053.09868583091 interest = 103.574568620179
month 32: balance = 5889.03366392809 interest = 100.884978097182
month 33: balance = 5722.23422499356 interest = 98.1505610654682
month 34: balance = 5552.65479541012 interest = 95.3705704165593
month 35: balance = 5380.24904200029 interest = 92.5442465901686
month 36: balance = 5204.96985936696 interest = 89.6708173666715
month 37: balance = 5026.76935702307 interest = 86.749497656116
month 38: balance = 4845.59884630679 interest = 83.7794892837179
month 39: balance = 4661.40882707857 interest = 80.7599807717799
month 40: balance = 4474.14897419655 interest = 77.6901471179762
month 41: balance = 4283.76812376649 interest = 74.5691495699425
month 42: balance = 4090.2142591626 interest = 71.3961353961082
month 43: balance = 3893.43449681531 interest = 68.17023765271
month 44: balance = 3693.37507176223 interest = 64.8905749469218
month 45: balance = 3489.98132295827 interest = 61.5562511960372
month 46: balance = 3283.19767834091 interest = 58.1663553826378
month 47: balance = 3072.96763964659 interest = 54.7199613056818
month 48: balance = 2859.23376697403 interest = 51.2161273274431
month 49: balance = 2641.93766309026 interest = 47.6538961162338
month 50: balance = 2421.0199574751 interest = 44.0322943848377
month 51: balance = 2196.42029009969 interest = 40.350332624585
month 52: balance = 1968.07729493468 interest = 36.6070048349948
month 53: balance = 1735.92858318359 interest = 32.8012882489114
month 54: balance = 1499.91072623665 interest = 28.9321430530599
month 55: balance = 1259.9592383406 interest = 24.9985121039442
month 56: balance = 1016.00855897961 interest = 20.99932063901
month 57: balance = 767.992034962601 interest = 16.9334759829935
month 58: balance = 515.841902211978 interest = 12.7998672493767
month 59: balance = 259.489267248844 interest = 8.5973650368663
month 60: balance = -1.13591163034175 interest = 4.32482112081407


As for the exact terms of early termination on the loan, this will depend on the loan terms. Many loans have prepayment penalties, but some do not. You should never have to pay interest on money you have paid back, so discuss the specific terms of the loan with the bank.

Best of luck!

Answer 2

When you pay your loan in full you will pay off the unpaid principal balance and the per diem interst from the date of the last payment to the date of payoff.

Answer 3

It alterations. on the instantaneous, broking service financing is probable extra perfect as maximum sellers are having a not person-friendly time transferring automobiles. there are a determination of sellers providing 0% financing on the instantaneous. there are cases even as a community economic employer or credit union has extra perfect words.

Answer 4

Whenever you take a loan there is an amortization schedule that tells you what your remaining balance is at any time during the loan period. Using your example I ran an amortization schedule with a loan starting date of Jan. 1, 2007, first payment date of Feb. 1, 2007 and here is the schedule (although it isn't formatted very well):

Compound Period : Monthly
Nominal Interest Rate : 20.000 %
Effective Annual Rate : 21.939 %
Periodic Rate : 1.6667 %
Daily Rate : 0.0542 %
CASH FLOW DATA
Event Start Date Amount Number Period End Date
1 Loan 01/01/2007 10,000.00 1
2 Repayment amount 02/01/2007 264.94 5 9 Monthly 12/01/2011
3 Payment 01/01/2012 264.94 1
AMORTIZATION SCHEDULE - Normal Amortization
Date Payment Interest Principal Balance
Loan 01/01/2007 10,000.00
1 02/01/2007 264.94 166.67 98.27 9,901.73
2 03/01/2007 264.94 165.03 99.91 9,801.82
3 04/01/2007 264.94 163.36 101.58 9,700.24
4 05/01/2007 264.94 161.67 103.27 9,596.97
5 06/01/2007 264.94 159.95 104.99 9,491.99
6 07/01/2007 264.94 158.20 106.74 9,385.25
7 08/01/2007 264.94 156.42 108.52 9,276.73
8 09/01/2007 264.94 154.61 110.33 9,166.40
9 10/01/2007 264.94 152.77 112.17 9,054.24
1 0 11/01/2007 264.94 150.90 114.03 8,940.20
1 1 12/01/2007 264.94 149.00 115.94 8,824.27
2007 Totals 2,914.33 1,738.59 1,175.73
1 2 01/01/2008 264.94 147.07 117.87 8,706.40
1 3 02/01/2008 264.94 145.11 119.83 8,586.57
1 4 03/01/2008 264.94 143.11 121.83 8,464.74
1 5 04/01/2008 264.94 141.08 123.86 8,340.88
1 6 05/01/2008 264.94 139.01 125.92 8,214.95
1 7 06/01/2008 264.94 136.92 128.02 8,086.93
1 8 07/01/2008 264.94 134.78 130.16 7,956.77
1 9 08/01/2008 264.94 132.61 132.33 7,824.45
2 0 09/01/2008 264.94 130.41 134.53 7,689.91
02/06/2007 Page 1
AMORTIZATION SCHEDULE
Date Payment Interest Principal Balance
2 1 10/01/2008 264.94 128.17 136.77 7,553.14
2 2 11/01/2008 264.94 125.89 139.05 7,414.09
2 3 12/01/2008 264.94 123.57 141.37 7,272.72
2008 Totals 3,179.27 1,627.72 1,551.55
2 4 01/01/2009 264.94 121.21 143.73 7,128.99
2 5 02/01/2009 264.94 118.82 146.12 6,982.87
2 6 03/01/2009 264.94 116.38 148.56 6,834.31
2 7 04/01/2009 264.94 113.91 151.03 6,683.28
2 8 05/01/2009 264.94 111.39 153.55 6,529.73
2 9 06/01/2009 264.94 108.83 156.11 6,373.62
3 0 07/01/2009 264.94 106.23 158.71 6,214.90
3 1 08/01/2009 264.94 103.58 161.36 6,053.55
3 2 09/01/2009 264.94 100.89 164.05 5,889.50
3 3 10/01/2009 264.94 98.16 166.78 5,722.72
3 4 11/01/2009 264.94 95.38 169.56 5,553.16
3 5 12/01/2009 264.94 92.55 172.39 5,380.77
2009 Totals 3,179.27 1,287.32 1,891.94
3 6 01/01/2010 264.94 89.68 175.26 5,205.51
3 7 02/01/2010 264.94 86.76 178.18 5,027.33
3 8 03/01/2010 264.94 83.79 181.15 4,846.18
3 9 04/01/2010 264.94 80.77 184.17 4,662.02
4 0 05/01/2010 264.94 77.70 187.24 4,474.78
4 1 06/01/2010 264.94 74.58 190.36 4,284.42
4 2 07/01/2010 264.94 71.41 193.53 4,090.89
4 3 08/01/2010 264.94 68.18 196.76 3,894.13
4 4 09/01/2010 264.94 64.90 200.04 3,694.09
4 5 10/01/2010 264.94 61.57 203.37 3,490.72
4 6 11/01/2010 264.94 58.18 206.76 3,283.96
4 7 12/01/2010 264.94 54.73 210.21 3,073.75
2010 Totals 3,179.27 872.25 2,307.02
4 8 01/01/2011 264.94 51.23 213.71 2,860.04
4 9 02/01/2011 264.94 47.67 217.27 2,642.77
5 0 03/01/2011 264.94 44.05 220.89 2,421.88
5 1 04/01/2011 264.94 40.36 224.57 2,197.31
5 2 05/01/2011 264.94 36.62 228.32 1,968.99
5 3 06/01/2011 264.94 32.82 232.12 1,736.87
5 4 07/01/2011 264.94 28.95 235.99 1,500.88
5 5 08/01/2011 264.94 25.01 239.92 1,260.95
5 6 09/01/2011 264.94 21.02 243.92 1,017.03
5 7 10/01/2011 264.94 16.95 247.99 769.04
02/06/2007 Page 2
AMORTIZATION SCHEDULE
Date Payment Interest Principal Balance
5 8 11/01/2011 264.94 12.82 252.12 516.92
5 9 12/01/2011 264.94 8.62 256.32 260.60
2011 Totals 3,179.27 366.11 2,813.16
6 0 01/01/2012 264.94 4.34 260.60 0.00
2012 Totals 264.94 4.34 260.60
Grand Totals 15,896.33 5,896.33 10,000.00

Answer 5

If you pay off the principle, then it will terminate the loan and you should have no further payments on the loan.

Answer 6

u would pay off the principal, not the interest