need advise on this interest rate?

Question

a bank is offering 50000 usd loan for a period of 12 years
with an interest of 6% per year for the whole period
another bank offers same interest but every year i will pay 6% for the remaining amount not for the whole 50000
i wonder how much both payment will be after 12 years

i hope i made it clear
thanks

Answer 1

Well, after 12 years both loans will be paid off, so 0 for both.

Is this for homework? Looks like they are talking about compounded interest versus simple interest. The first loan will use compounded interest. Your payments will be the same every month, but for the first few years you'll be paying mostly interest. The second loan is a simple interest loan, your payments will be higher than the first loan at first, because you're paying the interest on the whole $50K the first month. But as the balance decreases, so will your payments, with the last payments being very small, becasue you're only paying the interest on whatever portion of the balance you haven't repaid.

In both cases you'll pay the exact same amount of interest over 12 years. It's just that the first loan will average those payments out for you, whereas the 2nd loan will make you pay the actual interest as it is accrued.

Answer 2

40 years and the only % rate from real banks ,
I have ever heard of is the charge on the remaining balance .
Who cares what the amount would be for some strange new bank that charges full % on the whole $50K forever ?
You KNOW it is more , why waste your time with them when you know ?

FYI - And I don't think you understood the payments on the 1st bank ,
That is toooo atypical .

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