interest rate on a canada car loan approval

interest rates can vary on canada car loan approvals. I want to spend a short time giving some examples of interest rate and how it can impact payment and interest on a good credit car loan and a bad credit auto loan. When you are approved for a car loan in canada the loan can be presented with an car loan ammortization schedule or a loan ammortization schedule. This schedule will give a breakdown of your monthly payments, how much will be going to principal, how much to interest, total interest to be paid over the full loan term, cumulative interest.

Heres an example:

Lets use a $10,000 loan with a 60 month term(based on 12 payments a year)

  1. If interest rate is 8% then your payment is approx 202.76/month. Total interest would be approx $2165.84 for the full term(assuming no early payments).
  2. If interest rate is 10% then your payment is approx 212.47/month. Total Interest would be approx $2748.23 for the full term(assuming no early payments)
  3. If Interest rate is 20% then your payment is approx 264.94/month. Total interest would be approx $5896.33 for the full term(assuming no early payments)
  4. If interest rate is 29.9% then your payment is approx 322.92/month. Total interest would be approx $9375.20 for the full term(assuming no early payments)

So you can see from the above examples that payment can increase approx $120/month with the 21.9% increase in interest. The total cost of borrowing increases approx $7200 over the full 60 month term.

Now lets take the example #4 above and apply an early payment option to it. If you add only $100 extra payment a month to the payment it would bring the interest down to approx $5286.58. This saving approx $4100 on the loan.  If you make $200 extra payment a month to the same loan it brings down the interest to approx $3752.52, saving approx $5600 on interest.

In my opinion it would be a good idea to make as many early payments as possible on Car Loans in Canada or Car loans In Alberta. We oftern forget about how we can use tax returns efficiently. We race to the nearest business, file a return, and wait for the cheque. In my opinion it would be wise to put that return to good use and pay off the car loan.

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Just my 2 Cents

-M

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