Cost of a Loan

Question: 

which of the following will increase the cost of a loan?

 

-when the interest rate (APR) increases?

-when the dealer offers 0% interest?

-when the length of the loan decreases?

-when the interest rate (APR) decreases?

Answer: 

There are many factors that may contribute to the cost of credit. These factors may vary depending upon the type of credit used. For example, the cost of an automobile loan is affected by different factors than the cost of money borrowed on a credit card. However, there are three main factors that affect the cost of all types of credit:

  • Interest – Interest is the charge for borrowing money. Interest is expressed as a percentage rate. The higher the interest rate, the more interest you will pay and therefore, the more expensive credit will be.

  • Time period – The time period is the length of time it takes to repay the borrowed money. The longer the time period, the more interest you will pay and therefore, the more expensive credit will be.

  • The amount borrowed – The more money you borrow, the more money you are going to pay back. Depending upon the specific time period and interest rate, you may pay more interest the more money you borrow.

To summarize, as the interest rate increases so does the cost of credit. As the time period increases so does the cost of credit. The more money you borrow, the more you will have to pay back.

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Comments

answer this topic

Lots of specialists claim that loans aid a lot of people to live the way they want, just because they can feel free to buy needed goods. Moreover, a lot of banks present sba loan for different persons.

Ok the whole thing explain

Ok the whole thing explain that the person cannot escape from the interest rate whether he is taking loan from the bank or borrowing from some person or the person is not able to repay his laon within the particular period of time that difinetly a big burden which is put on the head of the person especially when the person is running from time of bad credit. Nice article with eye opening points.

Personally I think if it's

Personally I think if it's possible it's better not to deal with credits and loans at all!

JasmineNosen's picture

loans

Rather than giving consumers cash,the government are offering cash cards for a little fee. With this extra fee, the store was charging over the legal limit. That meant the government needed to go in and order the business to pay back all the little charges. Relying on loans alone does not guarantee you a good finance management and better credit status in return.

Good rule of thumb for me is

Good rule of thumb for me is ALWAYS use a loan amortization table to figure out how much you will be paying, and NEVER pay the minimum. If you plug in 4%, you will see that the TOTAL interest on the WHOLE loan will be way more than 4% on the principle (the original loan amount). APR is the annual percentage rate, to get monthly, just divide it by 12, and you will see how much interest is being charged per month. As someone else posted, be careful of all loans!

Personally for me it should

Personally for me it should be really great to know more details about loans here!

To be honest I really hate

To be honest I really hate loans, I only take them when absolutely necessary. Dealing with them is a big headache.

Taking loan is really

Taking loan is really unwanted to everyone but afterall sometimes we are unable to avoid it. By the way whatever you have shared here about cost of the loan is really outstanding from all side.

This strategy will really

This strategy will really work. But it's not the fairest way to make money. 

hi...I read your post this

hi...
I read your post this was good and it gives me some good information about the loans.
And also give the information about how to reduce the APR of the loans.
Thanks to post

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Sound like very brilliant input. I appreciate you wisdom about the cost of a loan. I will come back here again to read about more wisdom of you. Thanks.

I really appreciate the

I really appreciate the writer to make this post, this is not only informative but it is a very good contribution in the used cars industry.

Credits and loan are

Credits and loan are frustrating things only , try to avoid as much as possible as its repayment becomes the loan double you have taken.
 

It's really a great thing you

It's really a great thing you have noticed and explained here in a stylish way. I read and i loved it. thanks for posting.

Great Article!

I love this! Really cool!

Interest – Interest is the

Interest – Interest is the charge for borrowing money. Interest is expressed as a percentage rate. The higher the interest rate, the more interest you will pay and therefore, the more expensive credit will be.

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The PSLF Program is intended to encourage individuals to enter and continue to work full-time in public service jobs. Under this program, borrowers may qualify for forgiveness of the remaining balance of their Direct Loans after they have made 120 qualifying payments on those loans while employed full time by certain public service employers. 

Credit Card Rates

A lot of people are now purchasing credit cards because they find it really helpful. If you have no cash right now while you are shopping, you can immediately use your credit card to pay for your stuff. It has rarely been a better time to borrow, except with regards to credit cards. Charge card rates are increasing again, according to a new report. That is a contrast from most other kinds of loans, which are seeing historically low rates. If you need fast cash, get a short term loan. If you are having a hard time paying your bills right now, you should try availing a short term loan. You will be able to pay your monthly bills on time and will also be able to buy the things that you need at home,

Thanks to your question. I

Thanks to your question. I personally borrowed from online payday loan I have searched online. Personal loans for small amounts are for people in need of temporary financial assistance. In most cases, loans are based on income and other signals, with no credit checks against the credit bureaus involved. They recommend that borrowers consider the amount of their next paycheck and determine how much they can responsibly pay back within their budget. Although most lenders allow you to “re-purchase” or renew your payday loan, this is not recommended, as it can lead to a cycle of loans that end up costing you much more in the long term.