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## What kind of interest is this??

Senior Contributor

## What kind of interest is this??

Dear fellow FICO friends,

Please pull out your trusty math skills, maybe a calculator, and help me find the answer here.

Loan amount - \$11,025.00

Interest ONLY payment - \$69.00

What does that interest calculate out to be?

Thanks friends!

*** for the story behind it, someone offered my son those terms, but refused to state what the interest rate was.  Balloon payment of the principle due in exactly one year.  He thought about it for like 2 hours, then turned it down.  But he asked me about it...

Message 1 of 11
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Moderator Emeritus

## Re: What kind of interest is this??

@IOBA wrote:

Dear fellow FICO friends,

Please pull out your trusty math skills, maybe a calculator, and help me find the answer here.

Loan amount - \$11,025.00

Interest ONLY payment - \$69.00

What does that interest calculate out to be?

Thanks friends!

*** for the story behind it, someone offered my son those terms, but refused to state what the interest rate was.  Balloon payment of the principle due in exactly one year.  He thought about it for like 2 hours, then turned it down.  But he asked me about it...

Darn.  Don't have the math for you, but after hearing the terms, I can deliver at least one verdict.For me - and obviously your son - it holds absolutely no interest whatsoever.

Now some real math officianados can take it on and give you a serious answer.  But I still like mine......

Just puttin' syrup on something, don't make it pancakes.
Message 2 of 11
Senior Contributor

## Re: What kind of interest is this??

And you are right - it's zero interest for us, but I still would like to know what the interest rate calculates out to be.   And for whomever does the math, there are no additional fees, like loan origination fees.  Just a plain "borrow this amount, pay this amount that is interest only".

I hope someone comes along soon and helps me figure it out.  Ok, really, I hope they tell me the answer.   And if they want to tell me how to figure it out on my own, I'd appreciate that too.

Thanks!

Message 3 of 11
Senior Contributor

## Re: What kind of interest is this??

Is it roughly 7%?

Have no clue if the rate is simple or compounding interest.

Message 4 of 11
Moderator Emeritus

## Re: What kind of interest is this??

I came up with \$11,025.00 X .625% = \$68.90625.

Message 5 of 11
Moderator Emerita

## Re: What kind of interest is this??

@IOBA wrote:

...Loan amount - \$11,025.00

Interest ONLY payment - \$69.00

What does that interest calculate out to be?

This would be \$69 per month, right?

\$69 x 12 = \$828

828 / 11025 = 7.5-ish%, I think...

(I'm on cold medicine, so no telling if I did anything right whatsoever in the calculating )

* Credit is a wonderful servant, but a terrible master. * Who's the boss --you or your credit?
FICO's: EQ 781 - TU 793 - EX 779 (from PSECU) - Done credit hunting; having fun with credit gardening. - EQ 590 on 5/14/2007
Message 6 of 11
Moderator Emeritus

## Re: What kind of interest is this??

@haulingthescoreup wrote:

@IOBA wrote:

...Loan amount - \$11,025.00

Interest ONLY payment - \$69.00

What does that interest calculate out to be?

This would be \$69 per month, right?

\$69 x 12 = \$828

828 / 11025 = 7.5-ish%, I think...

(I'm on cold medicine, so no telling if I did anything right whatsoever in the calculating )

I took it that it was a one time interest payment of \$69. Maybe I read it wrong. How shocking it would be if I got something wrong.

From a BK years ago to:
EX - 9/09 pulled by lender 802
EQ - 7/06-663, 3/10-800
TU - 8/10-772
You can do the same thing with hard work

Message 7 of 11
Senior Contributor

## Re: What kind of interest is this??

Yep - only \$69 of pure profit, I mean interest, per month, for 12 months.  No principle payment, no fees.  Just interest.  And absolutely nothing to show for it!

* hope you feel better!

* we are never wrong - we just have learning experiences!

Message 8 of 11
Valued Contributor

## Re: What kind of interest is this??

That is 7.51% interest. That is assuming interest compounded monthly, which is common with a monthly payment cycle.

That is a reasonable interest to pay. What could be unreasonable is the problems associated with a baloon payment, etc. And we are ignoring what he is getting for the money.

Most of the lenders that I know would want that or a bit more with collateral. Most are currently charging 10%. These are profit sharing plans, pension plans, etc.

Message 9 of 11
Senior Contributor

## Re: What kind of interest is this??

Are you ready for this?  He would never see the money.  The money would go into a frozen bank account to show the authorities  (for school - don't ask!) that he has enough money for emergencies.   They require that much in the bank, plus another \$875 per month to live on.

I just can't see giving someone \$65 of profit per month on money that we can't touch or use.  At the end of the one year term, the full amount goes back to the bank (which held it to begin  with) and the loan is finished.

For this loan, they will issue a statement saying he has emergency funds, thus he can stay in school.  (Don't ask!)

Message 10 of 11
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