![]() ![]() Payment Method: The payment method refers to whether the lender uses the start of period or end of period to determine when your loan is due. ![]() A compound rate is based on the amount of the principal plus any interest that has accrued. A simple interest rate is calculated based on the loan principal. Interest rates can be simple or compound. It’s a percentage of the total amount you’ve borrowed. Annual Interest Rate: The annual interest rate is the amount a lender charges you for borrowing money.For example, you have 360 months to repay a 30-year mortgage and 60 months to repay a 5-year personal or auto loan. Number of Months: The number of months refers to the loan term broken down by the total months you have to repay it.Your income and employment status play a role in determining the size of the loan amount, as do factors such as the collateral and your credit history. Depending on the type of loan, it can be anywhere from a few hundred dollars to hundreds of thousands of dollars. Loan Amount: Also known as the loan principal payment, this is the amount you’re borrowing.Knowing common loan terminology also gives you a clear picture of how much a loan will cost you in the long run. When borrowing money, it’s essential to understand the terms a lender will use so you have a clear idea of what you’re borrowing and what your repayment responsibilities are. If you prepay the loan, you’ll end up paying less interest over time and are likely to finish paying it off before the end of the term. Several factors can change your monthly payment amount. Divide the loan amount by the interest over the life of the loan to calculate your monthly payment. ![]() Divide this by 0.006, resulting in 95.31. Add 1 to the interest rate, then take that to the power of 120.
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