More details to this question:
The bank that financed my car where my interest rate is 21% is charging me double ... I financed 20,000 at 21% I've been paying for 3 yrs and was sold I still owe 17,000.... I spoke to customer service and was told that after I finish my loan I would have paid 42,000.... That's 100% interest...
1 ANSWER
The interest rate you were quoted was per year, which is standard Interest continues to accrue on the principal which has not been paid. If the loan terms said the interest would be compounded, interest would also continue to accrue on any unpaid interest. For example, let's say you borrow $100 at 10% annual interest. The first year you pay $20. You now owe $90 in principal; you paid the $10 interest for the first year and $10 of principal. At 10%, you will accrue a further $9 in interest over the following year. Thus, at an interest rate of 21% annually, the loan does not have to go on very long for you to wind up paying twice the principal.
Answered on May 07th, 2013 at 2:21 PM