Interest computing wizards HELP!

[akshatp]

Let me start off by prefacing that this is my wife's car loan payment history. I hate carrying debt so i dont have much knowledge with how interest is accrued.

Take a look at the Interest charged for the four last payments. The "due date" is the 21st of each month. Why was it only ~$5 a month when the payment was made way earlier than the due date?

Note: The 2nd payment in December was actually January's payment, she accidentally sent in two checks for December thinking she hadnt paid it yet.

How is the interest computed?!!!!? In lamens terms please!


Date * Amount Paid * Principal * Interest * Balance
11/21/2006 $277.41 Payment $256.40 $21.01 $2,569.56

12/06/2006 $277.41 Payment $271.59 $5.82 $2,297.97

12/19/2006 $277.41 Payment $272.22 $5.19 $2,025.75

02/13/2007 $277.41 Payment $260.05 $17.36 $1,765.70

 

[KLin]

Looks like how much of the payment made went towards interest.

 

[akshatp]

Originally posted by: KLin
Looks like how much of the payment made went towards interest.

I know what the numbers mean.. I want to know how they compute how much interest they charge. I get that whatever doesnt go to interest goes towards the principal.

 

[KLin]

What's the APR?

 

[Matthias99]

Originally posted by: akshatp

Originally posted by: KLin
Looks like how much of the payment made went towards interest.

I know what the numbers mean.. I want to know how they compute how much interest they charge. I get that whatever doesnt go to interest goes towards the principal.

Depends on the exact loan (the paperwork should specify exactly how they calculate the interest), but it's probably calculated daily (or maybe weekly) based on the current principal. It might be that you only paid 1 week's worth of interest on each of the 'December' checks, since they were so closely spaced (and not long after the 'November' payment either).

It's, what, about 6.5% APR?

Edit: It does seem like you paid less interest in December, though. Weird.

Edit again: No, you paid too much interest in November. Had there been an extra week or something between your payments there? I also misread your numbers and thought the last check was 1/13/07, not 2/13/07.

You have about two weeks' worth of interest on each the two December checks, and just over six weeks' worth on the February one (which looks right). But it looks like the November one also has maybe six weeks' worth.

If your APR is 5.9%, you're paying about (1.059^(1/12)) ~= 1.0048 ~= .48% per month. So each month, you pay around $4.80 in interest per $1000 in principal.

 

[akshatp]

Originally posted by: Matthias99

Originally posted by: akshatp

Originally posted by: KLin
Looks like how much of the payment made went towards interest.

I know what the numbers mean.. I want to know how they compute how much interest they charge. I get that whatever doesnt go to interest goes towards the principal.

Depends on the exact loan (the paperwork should specify exactly how they calculate the interest), but it's probably calculated daily (or maybe weekly) based on the current principal.

It's, what, about 6.5% APR?

Close!! 5.9%

 

[KLin]

Originally posted by: akshatp

Originally posted by: Matthias99

Originally posted by: akshatp

Originally posted by: KLin
Looks like how much of the payment made went towards interest.

I know what the numbers mean.. I want to know how they compute how much interest they charge. I get that whatever doesnt go to interest goes towards the principal.

Depends on the exact loan (the paperwork should specify exactly how they calculate the interest), but it's probably calculated daily (or maybe weekly) based on the current principal.

It's, what, about 6.5% APR?

Close!! 5.9%

It's compounding on a daily basis. .0162% per day.

 

[akshatp]

Originally posted by: Matthias99

Originally posted by: akshatp

Originally posted by: KLin
Looks like how much of the payment made went towards interest.

I know what the numbers mean.. I want to know how they compute how much interest they charge. I get that whatever doesnt go to interest goes towards the principal.

Depends on the exact loan (the paperwork should specify exactly how they calculate the interest), but it's probably calculated daily (or maybe weekly) based on the current principal. It might be that you only paid 1 week's worth of interest on each of the 'December' checks, since they were so closely spaced (and not long after the 'November' payment either).

It's, what, about 6.5% APR?

Edit: It does seem like you paid less interest in December, though. Weird.

Edit again: No, you paid too much interest in November. Had there been an extra week or something between your payments there? I also misread your numbers and thought the last check was 1/13/07, not 2/13/07.

You have about two weeks' worth of interest on each the two December checks, and just over six weeks' worth on the February one (which looks right). But it looks like the November one also has maybe six weeks' worth.

If your APR is 5.9%, you're paying about (1.059^(1/12)) ~= 1.0048 ~= .48% per month. So each month, you pay around $4.80 in interest per $1000 in principal.

If that were true then how did she pay $17+ for the payment made in February? The principal was ~$2000 meaning the interest shouldnt have been more than $4.80*2 right?

This is so confusing.

 

[Matthias99]

Originally posted by: akshatp

If your APR is 5.9%, you're paying about (1.059^(1/12)) ~= 1.0048 ~= .48% per month. So each month, you pay around $4.80 in interest per $1000 in principal.

If that were true then how did she pay $17+ for the payment made in February? The principal was ~$2000 meaning the interest shouldnt have been more than $4.80*2 right?

This is so confusing.

You paid on 12/19, then on 2/13. That's eight weeks between payments, or about 2 months, not 1. (2 * 4.80 * 2) = $19.20. They're probably compounding it daily, which would make the rate a little different than what I estimated on a monthly basis.

 

[akshatp]

Originally posted by: Matthias99

Originally posted by: akshatp

If your APR is 5.9%, you're paying about (1.059^(1/12)) ~= 1.0048 ~= .48% per month. So each month, you pay around $4.80 in interest per $1000 in principal.

If that were true then how did she pay $17+ for the payment made in February? The principal was ~$2000 meaning the interest shouldnt have been more than $4.80*2 right?

This is so confusing.

You paid on 12/19, then on 2/13. That's eight weeks between payments, or about 2 months, not 1. (2 * 4.80 * 2) = $19.20. They're probably compounding it daily, which would make the rate a little different than what I estimated on a monthly basis.

Ohhhhh DUH... I feel like an idiot... I get it now. So if she made the payment on say, the 15th every month, the interested rate would be consistent. OK.. thanks everyone for your input.