Please Explain.

[Anonymous]

I was approved (w/ a co-signer) for a 22k loan at 8% apr for 48 months. I was told that my monthly payment will be $537.  The total interest (8%) will be $1760 plus $22000, which bring me to a grand total of $23760. So when I divide that by 48 months I get $495 as what should be my montly payment. What's with $42 a month difference?????

[marty56]

Check out http://www.bankrate.com/brm/auto-loan-calculator.asp

$537 is correct based on your info.

[Anonymous]

APR = annual percentage rate

You aren't paying 8% total interest, you are paying 8% interest a year on the principle remaining. Thus, that interest compounds and you will pay $3780 in interest if you pay on time but are never ahead on your payments. Each month you will pay down a higher amount of principle and pay less in interest, but you will be paying a lot in interest the first year + of your loan.

Check out the bankrate link above, fill in the info and click on Show/Recalculate Amortization Table. That will show you what you will pay towards principle and what you pay in interest every month and for the life of the loan.

[Anonymous]

oh wow, I feel like an idiot. Thank You !!!

[marty56]

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dvroberts81 wrote:

oh wow, I feel like an idiot. Thank You !!!

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No, it's all just a learning process.  If we new everything then most of us wouldnt be here.  Read and learn here.