Things You Can't Afford

A rough guide to loan payments At 10% interest, pay 1.5% of the price tag / month for 4 years (3% / month for 2 years). At 12% interest, pay 2% of the price tag / month for 4 years (4% / month for 2 years). At 14% interest pay 2.5% of the price tag / month for 4 years (5% / month for 2 years). For each 2% the interest rate goes up or down the payment rate changes by 0.5% accordingly. However the length of time remains the same. Example: You want to buy a Ford Mustang for $20 000. You put a down payment of 10% = $2 000. Then you arrange a 12% interest rate, so you will be paying 4% of 20,000 = $800 / month, for 2 years. So in the end your car cost you $21,200. The payments include principal and interest, so at the end of the time the item is yours. Of course banks will require the item be insured (more about insurance rates later) and may take other steps to protect their investment. If you wish to pay off a loan all at once - you may - but the bank will often charge you a fee amounting to what you would have paid out in interest over the entire term. You are not getting it any cheaper, you are just getting ownership sooner.

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