How to calculate housing and car loan interest?

Perhaps you may not aware the way our car loan interest and the housing loan interest are calculated differently.

Housing loan interest is calculated based on the principal of the loan that you have and the interest is not fixed. Principal of your loan is the amount of money that you still owe the bank.

Car loan interest is calculated based on the total amount of loan that you have and the interest is fixed.

Housing Loan

For example, you borrow $50K from a bank at 5% interest rate for 5 years.

1 year housing loan interest:

• $50K X 5%
• $2,500 (Yearly)

First month housing loan interest:

• $2,500 / 12
• $208.33 (First Month)

Depending on the monthly installment amount that you have, let’s say $1K per month, you will reduce your principal from $50K to:

Renew Principal $ after first payment:

• $50K – ($1K - $208.33)
• $49,208.33 (New Principal)

The second month interest will then be calculated based on this new principal amount, $49,208.33 and every month you will be reducing your principal amount.

Second month housing loan interest:

• $49,208.33 X 5% / 12
• $205.03 (Second Month)

Let’s do the math by yourself using excel or use the following housing loan calculated, that you’re will end-up to pay $943.56 monthly and the total interest paid is $6613.70

Total car loan interest rate:

• $6613.70 / $50K X 100%
• 13.23% (Total Housing Loan Interest Rate)

Car Loan

On the other hand, you have car loan of $50K at the interest rate of 5% for 5 years term.

1 year car loan interest:

• $50K X 5%
• $2,500. (Yearly)

First month car loan interest:

• $2,500 / 12
• $208.33 (First Month)

The only difference between the housing loan versus car loan is the car loan interest rate is fixed for every month. Therefore:

First month car loan interest:

• $2,500 / 12
• $208.33 (Second Month)

Let’s do the math again and the total amount that you want to pay including the interest for the entire loan is ($50K + $2,500 X 5 years) = $62,500 and monthly payment will be ($62,500 / 5 / 12) = $1,041.66 

Total car loan interest rate:

• ($2500 X 5 years) / $50K X 100%
• 25% (Total Car Loan Intereset)

As you can see the car loan interest is 1.9 X higher than housing loan interest (i.e. 12.23% X 1.9 = ~25%) 

Conclusion

Because the car loan does not reduce the principal amount and the interest is fixed through the year, therefore the interest is higher than the normal housing loan interest calculation provided the interest rates are the same.

So usually what people do when they have housing loan is try to reduce the principal amount as early as possible either by flexible-loan package or early extra payment. It doesn't work for car loan because the interest is fixed and the total interest that your are going to pay is 1.9 X higher than housing loan interest.

You may also want to know that the car value is depreciating every year after you buy it. Think of it, is this making sense to buy a car or house?

source : financialindependent.blogspot.com

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source : signscolumbiasc.com

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source: www.s-creative.nl

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source : proactiveidea.com

A CAR LOAN CALCULATOR IS PERFECT FOR BUDGETING

Getting a car is a dream may wish to experience, and with a car loan calculator one can now calculate the costs involved of acquiring a loan. With so many people simply unable to afford to buy a car given how expensive the purchase is and the low savings people generally have, getting a car loan is a route many who buy a car will have to take. Thus a car loan calculator is not only a luxury but anabsolute necessity.

Cars are personal, deeply so in fact. You’d be hard pressed to find a car owner who thinks of their car as merely something that affords them the convenience to go to and from the places they wish to go. Even still, with so many car owners and would-be car owners holding their vehicle purchase in high regard, it is surprising that so few people actually save up long enough that they can buy the car they want without requiring a loan. Perhaps not so surprising given that the average person struggles with immediate gratification, thus “money in” people’s bank accounts seldom mean “money staying into a savings account o purchase car.”

But to be fair, even the most disciplined saver would have to save for years on end before they would be able to afford the car of their choice. So a car loan is a given, but so too should a car loan calculator if one wants to stick within one’s financial limits.

source: us.exaude.com

Auto loans: once a boon for America, now a bane

Summary: One of the many oddities of this cycle is that many things that were good during the post-WW2 era have become bad in the new era now starting (unrecognizably so, as we remain unaware of our changed circumstances). Like debt. As we see with auto loans, once useful — now malignant. Our use of debt also gives clues to our future.

Contents

1. Consumer debt in the old world, and the new
2. Automobile sales point to our new world
3. The terms are very easy
4. Why are these numbers important?
5. For More Information

(1)  Consumer debt in the old world, and the new

During the post-WW2 era increasing debt supercharged economic growth for the young and rapidly-growing West. But after 60 years of this our societies now carry massive debt loads, both public and private — while the numbers of elderly grow (who experience a crash of income upon retirement, plus rising costs to society for their pensions and health care). Carrying our current load might prove difficult; adding to it now is madness.

Plus, there are other factors in play. Fifty years of growing inequality, for still poorly-understood reasons, have hollowed out the middle class — diminishing their ability to carry their existing debt, making them dependent on borrowing to maintain their lifestyle.

Some take another step beyond borrowing. Borrowing to buy cars and homes results in slowly accumulating equity, one of the most common ways middle class households save. Increasingly Americans abandon buying with debt for renting. Rent homes instead of owning. Renting cars (leasing) instead of owning.

(2) Automobile sales point to our new world

Accelerating borrowing was a natural leading indicator of economic recoveries during the post-WW2 era. So economists see the waves of desperate borrowing by consumers since 2000 as a good thing. Hence their excitement about the subprime lending boom that drove the housing bubble. Such as today’s subprime borrowing to buy cars.

The extreme case of this blindness to our changed conditions is glee about the shift to renting cars (aka leasing). It shows vibrant demand for cars! As we see in this excerpt from a report by BofA-Merrill global economist Ethan Harris, 6 August 2014, showing that after mid-2012 leasing grew faster than total spending on vehicles (2012 saw many such transition points for the US economy).Households go for the low capital option: leasing soars:

Household outlays on leasing are booming at a 20% yoy pace — a clear sign that demand for vehicles is alive and kicking. With average lease payments lower than typical monthly ownership costs and with a down-payment not typically required to enter into a lease, the surge in vehicle leasing is likely a sign that financial restraints are still holding back some would-be buyers. Thus, as the economy improves, bottled-up household demand for vehicles could translate to higher sales.

Yes, in our society demand is “alive and kicking” by subprime households for cars bought with low-rate loans on easy terms — or even just renting (aka leasing). But does it point to an economic recovery — or exhaustion?

.

(3)  The terms are very easy

Turning back to people at least attempting to buy, there are four dimensions to consumer loans: the creditworthiness of the borrower, the interest rate of the loan, the length of the loan, and the collateral (the loan to value ratio). A report by Experian Automotive, 2 June 2014, describes the first three.

… average automotive loan term reached an all-time high of 66 months … loans with terms 73-84 months grew to 25% of all loans originated during the quarter. …

The average amount financed for a new vehicle loan also reached an all-time high of $27,612 in Q1 2014, up $964 from the previous year. In addition, the average monthly payment for a new vehicle loan reached its highest point on record at $474 in Q1 2014, up from $459 in Q1 2013.

… Market share for nonprime, subprime and deep subprime new vehicle loans in Q1 2014 rose to 34%.

Six and seven year long auto loans! At what point will the borrower have equity in their cars? Especially since these are probably the subprime borrowers that make up 1/3 of auto lending.

The fourth factor is equally ugly. Lenders are lending more than the value of the collateral (i.e., including closing costs and rolling over the deficit of the buyers’ trade-in). These are averages; half of loans have even higher LTVs. From Semiannual Risk Perspective, Office of the Comptroller of the Currency, Spring 2014:

(4)  Why are these numbers important?

The changing nature of auto sales tell us much about ourselves. They show how economists do not see the new era beginning. They imply slower growth in the future, as a household’s longer loans with smaller downpayments push out their ability to buy their next car. They tell us something about the recovery.

Auto sales have been a major driver of the recovery. Most economists expect auto sales to continue growing, helping power the long-awaited acceleration from slow ~2% growth to 3% or beyond. So the sustainability of auto sales — and the borrowing and leasing that fuels them — matter

Atif Mian and Amir Sufi show the importance of auto loans to auto sales, and of auto sales to consumer sales. These are from their post “Another Debt-Fueled Spending Spree?“, 31 March 2014. First, lending is rapid :

Second, since the crash auto sales have grown much faster than overall consumer spending.

(b)  Posts about consumer lending:

1. Rising consumer debt driving the recovery: boon or bane?, 10 November 2013
2. Auto loans are a driver of the expansion, but might be running out of gas, 1 April 2014
3. Debt unleashed again to ravage America: out of control auto lending, 2 July 2014

(c)  Posts about the debt supercycle:

1. Death of the post-WWII geopolitical regime – death by debt, 8 January 2008 – Origins of the long economic expansion from 1982 to 2006; why the down cycle will be so severe.
2. A picture of the post-WWII debt supercycle, 26 September 2008
3. Debt – the core problem of this financial crisis, which also explains how we got in this mess, 22 October 2008

source : abiusmaximus.com

Everything You Wanted To Know About Car Loans

In today’s world, owning a car has become one’s dream as well as requirement. Many people even start saving up on money from as early as their school days. It may or may not be the most expensive car on earth but it will be a dream car for someone who has never had it before. Sometimes, you may need to cut off your own needs in order to save money for car insurance. However, banks have made lives easier for all those people with dreams to have their own car, by offering secured car loans.

The most outstanding perk of these secured car loans is that you don’t get to pay interest money while paying off your loan. You can get loans of around $2000 to as big an amount as $50,000. The repayment period can range from 1-5 years depending upon the amount borrowed. With secured car loans, you have to be sure that you hold an asset equivalent to the amount you have borrowed. As bank holds the right to claim that property if in case you find yourself unable to pay off the loan you took. However, the borrower has to pay less interest as compare to the one who buys unsecured car loans.

With the help of secured car loans, you can buy whatever type of car you like. Also you have the complete authority to choose the repayment method and time period at your own leisure. In addition, to save yourself of time and effort you had better fill out the online form to get a secured car loan. This way, in few hours, cash will be deposited in your savings account.

These kinds of car loans have made life much easier. Now if you are a sports freak and want to get to the pitch on time, a car loan is the best thing to get your own car. However, if being a housewife you find it difficult to walk all the way to the grocery stores to collect the daily stuff, worry not, these car loans will help you too to have a car of your own.

Regardless of all this, you still have to meet certain prerequisites to get these car loans. You have to be 18 years or older in order to have a valid bank account. Then you have to be a local resident of that country in order to ask for any kinds of car loans. Once you fulfill these conditions, you need to check the documents of your assets if they are verified and available to be presented to bank manager. It is better to consult your regular bank manager before buying car loans. In this way you can achieve best results in no time.

source : uberarticles.com

Methods For Getting Best Car Finance

While shopping for a new auto loan, you must do a little research for the greatest car finance quote possible. All dealers claim to have the interest rates to get a new car financing, so you should do study to view who truly offers the best selection in your case.

Best bank car loans which can be advertised are unobtainable by the average consumer. 0% interest is certainly a great rate, but few will be entitled to this rate on the new auto loan. Everything has to be absolutely perfect: debt to income ratio, credit history, stability in employment and residency, and open credit accounts. Furthermore, to be eligible for these types of loans, you should buy a model the casino dealer has targeted to sell. Seldom can a customer locate the best auto loan by believing the dealer's ads.

Your bank or bank can on occasion offer you the greatest auto loan quote when you require to obtain auto financing. Many enables you to apply for your auto loan online, and some can offer a result within minutes. Needless to say, accusation in court one potential source for your auto financing, and might not be the best auto loan quote you'll find. However, furnished with their interest, down payment requirements, and payment amounts, that you can do some comparison shopping to see if you can find car finance at better terms.

One easy way for the greatest car loans quote is to go surfing. There are lots of sites that will compare rates with a used and new automobile financing by doing the comparing you. Normally, it is just necessary so that you can enter your personal data on one occasion, and also the computer will search to find the best loan quote from the companies registered with the site. Often, you will receive several offers from all of these services, then you can compare all their terms to select the best car finance terms for the situation.

Since only a few provider of an new car financing is registered each and every site, you may have to visit more than one site to obtain the compare car finance quotes. This may usually take you a few momemts per site, however, and the savings in your loan might be significant. Plus it isn't just the monthly interest that produces the very best car loans. Sometimes, a lesser down payment or a longer contract term on your own new car financing might be preferable for the situation.

The most effective auto finance quote is one which fits your financial allowance as well as your requirements. This is for almost any loan, not simply a new car loans. Just like you wouldn't need a mortgage that depletes your savings and it has a payment you are unable to afford, you do not want a brand new car loan that does the same. The best bargain, therefore, may well not necessarily be the lowest monthly interest.

Source: foxcarloans.wikidot.com

First Time Car Loans to Get Affordable Interest Rates and Terms

"The first time car loans have increased thanks to the online convenience of a simplified online application to approval process. The personal vehicle is a necessity and there’s a first time for everything. What makes these auto loan programs important is that they give a pleasurable experience and pleasant memories."

First Time Buyer Car Loan for Increasing the Number of Successful Drivers 

The first time buyers car program is proving to be a great shortcut to get behind the wheel of one’s personal vehicle. The purchase of a personal vehicle is different from everything else and is not as simple as choosing and taking it home. The car financing can be a real headache especially for first timers. For some time the rapidly developing internet technology provided detailed information for the novice to get prepared. Moreover, going one step further, the first time car loans simplify the process greatly. 

The first time car buyer loan will have never ending features to be careful of. The first time car buyers getting all the particulars done on their own are likely to stumble into difficulties and invite future trouble. The students and younger drivers faced a lot of repeated rejections and dejections before they could finally manage to land their auto loan. However, the changing times have simplified car finance a great deal. 

The first time car buyer program is a must for getting a good safe and reliable car. No matter how aware first time customers are there are plenty of people out there to make things difficult for them. The first time car buyers experience must be extraordinary in that it will be remembered for a long time, probably throughout life. Young or gullible innocent car buyers should take the benefits that these auto loan programs have to offer. The online application toguaranteed credit approval car loan precludes having to face intimidating strangers especially for money matters. 

The first time buyer car program is the best choice to get an affordable monthly car payment. The novice borrowers out to get their first personal vehicle will be at a definite loss to manage negotiations to achieve this. The key to successful auto finance car loans is to create a viable car purchase plan. The auto makers and financial institutions with special programs offer the services of certified credit counselor to create a successful car purchase plan. 

Get Approval for a First Time Car Loans in Just 15 Minutes!

The first time buyer car loan will require careful attention. This makes it important for potential car buyers to go with trustworthy lenders and dealers and specialized institutions. The first time car loans will prove to be their best choice in terms of getting the best offers. The potential car buyers of first time personal vehicle need to ensure an affordable monthly car payment. This is very important to make regular and timely payments and establish a reliable credit history for the future. 

The first time car loans are for teenagers, college goers, poor credit or no credit history customers and others for whom conventional car loans may be out of their reach. The first time car loans are going to help borrowers establish a credit history they can either be proud of or ashamed to use in the future. The choice is not theirs but utilizing certified credit counselor will prevent unfortunate experiences. For more information consider visiting AutoLoanBadCreditToday.com

Source: www.wamda.com

First Time Car Loan - Secure it Faster and Easier

“Securing quick approval for first time car loan is not enough, one must make sure that he gets a deal which will enable him to repair his damaged credit or establish excellent credit status much faster. In this regard, satisfying few eligibility criteria could be essential. Find out how to be eligible to get the same through a process which is less time-consuming and easy.”

First time car buyer loans are specifically made available for those who are out to purchase a car loan for the first time. Here, it is natural to be worried about the cost of auto loan that one will have to pay. Things are different now. It could be easier for an applicant to obtain an auto loan deal that fits in his budget as long as he has sufficient knowledge on the subject. Rate of interest received with first time car loan has become a huge concern for many. The type of interest rate that one qualifies for is usually determined by the status of his credit score. 

If applicant has excellent credit score, it could be easier for him to secure low rate auto loan. But, bad credit applicants also can rest assured as finding the best rates available for poor credit is fast and easy now. However, one may still have to meet some eligibility criteria set by lenders to improve his chances of deriving an affordable bad or no credit car loan. 

The first time car buyers may not have good credit history. Due to their unproven credit worthiness, lenders may consider it risky to grant quick auto loan approval with affordable rates. Here, one can consider finding a cosigner having excellent credit status and who agrees to make payments on auto loan if original borrower defaults on the same. This reduces lender’s risk and improves chances of obtaining easy approval. Putting up a sizable amount of money down could reduce one’s monthly auto finance payments significantly and also lender’s lending risk. This could ultimately prevent borrower from being upside down on his auto loan. But, those who are unable to arrange money for down payment, will be able to find lenders who could approve them for auto loans with no money down. But, they may have to pay more on auto loan. So, saving a good amount of money beforehand will be a smart move. 

Getting pre approved car loans can also be one of the excellent ways of obtaining auto finance. This is because borrower will have some clear idea about the price range for car he should look for and how much he needs to borrow and what kind of interest rates he will have to accept. Once, borrower is pre-qualified, he just needs to choose the car that fits his budget.

Besides, things may be more favorable in terms of getting instant first time car loan approval and lower rates if borrower has stable source of sufficient income, improvements in his credit score, overall good financial strength and so on. In this regard, one of the best ways to find cheapest rates available for your financial requirements and credit situation, is to start comparing few non-obligatory car finance proposals derived from different lenders. To save one’s time and energy in the same process, and also to make sure that one finds the best deal available for his situation, a better idea is to seek professional assistance of a reliable automotive finance service that runs a huge online lending network. 

Auto Loan Bad Credit Today provides immense support to buyers by helping them secure a special auto finance program and while doing so, its competent car finance experts make sure that a car loan deal that one gets qualified for could enable borrower to repair his damaged credit or establish excellent credit much faster. Borrowers who want to determine their eligibility for a low cost car loan now can visit, www.autoloanbadcredittoday.com

Source :www.wamda.com

5 Ways to Get Screwed Buying a Car

Buying a car? Make sure you avoid these car financing traps (scams, really) as you negotiate your car deal and sign the dotted line. The tips here are from the Consumer Federation of America—an association of non-profit consumer organizations that aims to advance the consumer interest through research, advocacy and education.

Car Financing Scams to Avoid

1. Back & Forth Financing

This happens when you’ve actually already signed a loan agreement—and  you’ve even driven your

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new car off the lot. To most, that would signify that you now own the car. But with back and forth financing (aka “yo-yo financing”), the dealer then calls later to inform you that your financing has been denied and you need to return to fill out and sign another contract. Of course, the new contract is based on a higher interest rate or requires a higher down payment. On top of that, the dealer will tell you that either your trade-in has already been sold, or he may threaten to repossess the new car or report it stolen—putting you in between a rock and a hard place.

Make sure any contract you sign is final and binding—no words like “conditional” or “subject to approval” anywhere on it. Also, to avoid the tactic entirely, you may want to seek financing from a bank or credit union—and compare rates with what you would get from the dealership. Just because you’re buying a car from that dealership doesn’t mean you have to accept financing from them.

2. Dealer Kickbacks

A dealer may assure you that his financing will give you the “best terms” possible. However, many times the dealer offer is not the best due to lender kickbacks that the dealership might receive once the loan is closed; or, the dealer’s lender may pad the interest rate—and pass that higher interest rate on to you—in order to make more money.

Again, you do not have to accept financing from the dealership. Rather, shop around for a car loan and get pre-qualified by a bank or credit union. Then, head to the dealer to shop for a new car.

3. Trade-Ins

If you still owe money on your trade-in, the amount you owe may be more than the car is currently worth. And a dealer may add that amount to your new car loan—in effect, your new loan then is actually paying for two cars: you new one and what you still owe on your trade-in. You may or may not be made aware of this when your new loan is discussed.

One red flag to this practice is if the dealer offers you more for your trade-in than it’s worth. It surely sounds like a good deal at first, but car dealers aren’t in the habit of making car buyers financially better off. If your trade-in is worth less than the amount you owe on it, there’s a good chance the dealer is baking that ‘great deal’ into your new car financing—so you’re really not getting such a great deal.

While it’s not always possible, to help avoid being in this situation, try to hold onto any car you own until the amount you owe on it is less than its resale value—ideally, wait until the full loan has been paid off before you consider using it as a trade-in.

4. Dealers’ Failure to Pay-off Existing Loans

If you’re trading in a car in order to buy a new one, the dealer may promise to pay off any outstanding loan balance you have on your trade-in. However, the dealer may not actually pay off the unpaid balance of that loan. That can affect your credit rating (not his!)

Make sure you any paperwork you sign covers the payoff of your trade-in vehicle’s loan. Be sure to then follow up with the lender on that loan to make sure that the loan was actually paid off by the dealer. If not, you should contact an attorney for legal help.

If possible, either keep your current car until the loan on it is paid off, or try to sell the car yourself and use that money to pay the loan off.

Special note on buying a used car: make sure you ask to see the title before you sign the purchase agreement. The dealer cannot take ownership of the title until any pre-existing loan on the vehicle is paid off.

5. Loan Packing

Car loan packing refers to all those “add-ons” that the dealer “packs” on to the car loan all while telling you they are necessary in order for you to get financing. Add-ons would include things like upholstery protection, GAP insurance, theft-etching, rust proofing, extended service contracts or lifetime oil changes.

Make sure you read your contract very carefully and understand all that’s been included as add-onsbefore you sign on the dotted line.

Source: www.lawyersandsettlements.com

The Car Loan Loophole: How Auto Dealers Dodged Financial Reform

The fat lady hasn’t sung yet, but the country’s auto dealers have been exempted from the financial reform bill now in its final stage in Congress. Given that the purpose of the bill is to protect Americans from harmful manipulation by the people selling them financial products, this is a pretty stunning development. The nation’s auto dealers either provide or broker most of the $850 billion worth of currently outstanding car loans across America. That’s a pile of financial product: It’s more than household credit card debt and second only to home mortgages.
Every year, 50 million people buy a car, and 94 percent of those sales are loan-financed, to an average tune of over $28,000 for a new vehicle. At both new and used lots, a good number of those loans involve unethical and fraudulent practices. Like the mortgage industry, dealers have pushed credit and pricey products on people who couldn’t afford them, and then fudged paperwork to make it appear they could. They offered "zero interest and no money down" and extended loan terms from what was until recently an average of three or four years to seven and even eight years, leaving huge numbers of car owners "upside-down" on their loans -- which is to say, owing more than their car is worth.

More egregiously, their business innovations -- not advertised as such, of course -- include such activities as “power-booking” (reporting to lenders that a car is equipped with non-existent options, thereby raising the amount of the loan) and “yo-yo financing” (a form of bait and switch, in which car buyers leave a down payment or trade in their car, drive off the lot, and then are falsely told that the financing "fell through" and that they have to pay a higher interest rate, often under threat of repossession or arrest).

The list goes on. Dealers regularly get kickbacks and markups from other lenders. Car loans have been packaged and dangerously securitized, just like home mortgages. Dealers encouraged many car buyers to use home equity loans to make their purchases, obliterating whatever cushion they had when home prices plummeted. It’s a jungle on the lot for consumers, especially the poor and those with poor credit.

In a recent New Yorker article, James Surowiecki seeks to explain how the auto dealer exemption could have happened when it is so opposed to the public interest, and when powerful actors like Citibank and JP Morgan did not escape regulation. He sees it as mostly a public relations coup, with the dealers presenting themselves as Main Street plain folks, virtually victims of the financial system themselves. They also played up the number of jobs dealerships provide in communities across the nation (how those jobs would dry up if dealers had to make an honest living was not made clear).

But what wasn’t noted is the power of the car dealers over the press itself.

The auto industry is the single largest advertiser in America’s newspapers, magazines, and television stations. It is the economic backbone of those media, and this helps explain the minimalist coverage, and the general lack of backbone in coverage, of this issue as the bill worked its way through Congress. Over the past several months, the loophole opened, then seemed to close, and then opened again. The media could have been educating the public on what the automotive loophole will cost them, day in and day out. Instead, they kept their focus on other sources and forms of lending abuses.

And when dealers are called “small businesspeople,” that may suggest they are in the same boat with the local embroidery shop owner or restaurateur, but dealers are often the largest business in a community, and many are part of large chains, like AutoNation. The auto dealer is a little guy like the beachfront mansions of Long Island are cottages, but PR-produced confusion has worked to the dealers’ advantage.

It isn’t just the financial reform bill that has left the real little guy, the car buyer, exposed to the avarice of auto dealers. Americans are at risk of ending up indentured to their car purchases because they can't escape from the car system itself. While the car is often presented as a vehicle of opportunity, getting people to work and new life chances, in reality it locks people into a costly lifestyle, creating more inequality in America than almost anything else besides access to quality education. While that’s a topic for another post, it is a key reason why transit and bikeable, walkable communities are so desperately needed -- to create a loophole car dealers can’t drive through

Source : usa.streetsblog.org