Thanks Danny, took 45 years to understand this and you to the point video presentation was excellent to understand and makes me think should I have taken this log years :).
Danny, thank you for this short and straightforward video. I wish I had come across this when I purchased my first brand-new car but I will be ready for my next one. God bless !
Knowledge is power. Thank you so much bro. Btw, you are a very good teacher. Concise and simple explanation. Teaching is an art that not many teachers have but you do :)
Each bank would have different bank fees for the same job. Example monthly account fees mortgage fees etc. The bank can give it to so just compare different lenders. Most lenders advertise APR .There would not be a formula.
If there is no other fees, then it will state "with 0% APR" Meaning, the deal will only involve Interest rate, so there's no requirement of finding out what the "APR" is. However, usually, the lender will advertise as "0% APR for first 12 months" And it should state what is the APR% after the 12 months.
Can I ask how you have calculated the APR? From my understanding, if the interest rate for a $25,000 loan is 6%, then the interest to be paid will be $1500 (i.e. 6% of 25,000). In the case of Bank A, the origination fee is $100. So my understanding of how to calculate the APR would be: $1500 + $100 (i.e. the finance charges combined) -------------------------------------------------------------------------------- $25,000 (the principle) Which = 0.064, expressed as a % = 6.4% APR. However, for Bank A you have given a result for APR as being 6.16%? Am I missing something here? Is it something to do with Amortization? I would be very grateful if someone could explain this to me 🙂.
You are not calculating the interest rate correct. It is not 6%x25k. Also every monthly payment some will go to principal and some to interest and as the principal goes down monthly, the interest amount goes down too. There are videos explaining this. Good luck
Huge question that is leaving me stomped.. so the 25,000 for the car divided by the 5 years (60 Months) equals out to $416.66 a month plus the interest rate of 6 percent equals to 441.66 a month with the interest.. so my question is.. with the apr of 6.16 percent would that 6.16 percent be added on top of the 441.66? To add up to 468.87 a month?
No that’s not how you calculate interest on a loan. Your interest payment is based on the entire loan amount, not the monthly payment amount. To make it easier, you can use this link to figure it all out. An amortization schedule is a table that shows how much interest and principal you’ll pay every month until your loan is paid off: www.amortization-calc.com/auto-car-loan-calculator/
Danny, good video. I only have two questions: 1) Is the Fixed Annual Interest Rate the same as what is referred to as APR (Annual Percentage Rate) ??? 2) I ask the above question because I have an auto loan ($30,480 for 60 Months) where the only rate shown on the paperwork is the APR (7.94). I use that rate to plug into your formula and get $617.14 as the monthly payment. Yet the paperwork of the loan shows the amount as $619.18, which is $2.04 difference (greater). Do you or anyone seeing this comment-post, know why there is a difference? Thanks, John
Thank you for your video! I'm still a little confused by the world annual in "Annual Percentage Rate" (APR). Does this mean that the APR is something that gets charged per year? For example for each year in a 60 month loan term, is that 6% x 5 years?
I’m not sure I understand your question. If you’re buying a car, use a down payment and pay monthly, that’s still a loan. The more money you put down the lower your monthly payments will be
If the APR is fixed, then it’s for the whole term of the loan (like 5 years). If the APR is variable then it can change anytime up or down during the period of the loan. Always try to get a fixed loan if you can to avoid having your rate increase down the road.
What I don’t understand is, why even bother looking at the interest rate then? You’d always want to look at the APR so you don’t miss the fees / charges?
What you’ll see banks advertise in big text on ads is the interest rate and the APR is usually in small print in hopes you don’t notice it. So they’ll try to trick you with a low interest rate vs another bank but get you with a higher APR that you didn’t notice. It helps to look at both to get a sense of how the bank does business. I avoid banks that charge high fees, but at the end the APR is what matters the most to your pockets.
Thanks Danny, took 45 years to understand this and you to the point video presentation was excellent to understand and makes me think should I have taken this log years :).
to the point and quick. THANK YOU!
Danny, thank you for this short and straightforward video. I wish I had come across this when I purchased my first brand-new car but I will be ready for my next one. God bless !
Knowledge is power. Thank you so much bro.
Btw, you are a very good teacher. Concise and simple explanation. Teaching is an art that not many teachers have but you do :)
Thanks man You were absolutely clear and to the point 👍🏽
I appreciate a 2 minute video to answer my question, thanks!
Clear and to the point. THANK YOU!
Kinda helpful, but an equation relating apr and interest rate would be useful
Did you ever find one?
Each bank would have different bank fees for the same job. Example monthly account fees mortgage fees etc. The bank can give it to so just compare different lenders. Most lenders advertise APR .There would not be a formula.
So for your APR %, does that get added on top of your monthly payments every year, increasing the monthly payments?
Short and sweet, great job!
How do you do the math from interest rate to APR? If there is no origination fee or other fees, is APR equal to the interest rate?
If there is no other fees, then it will state "with 0% APR"
Meaning, the deal will only involve Interest rate, so there's no requirement of finding out what the "APR" is.
However, usually, the lender will advertise as "0% APR for first 12 months"
And it should state what is the APR% after the 12 months.
Can I ask how you have calculated the APR?
From my understanding, if the interest rate for a $25,000 loan is 6%, then the interest to be paid will be $1500 (i.e. 6% of 25,000).
In the case of Bank A, the origination fee is $100. So my understanding of how to calculate the APR would be:
$1500 + $100 (i.e. the finance charges combined)
--------------------------------------------------------------------------------
$25,000 (the principle)
Which = 0.064, expressed as a % = 6.4% APR.
However, for Bank A you have given a result for APR as being 6.16%?
Am I missing something here? Is it something to do with Amortization?
I would be very grateful if someone could explain this to me 🙂.
You are not calculating the interest rate correct. It is not 6%x25k.
Also every monthly payment some will go to principal and some to interest and as the principal goes down monthly, the interest amount goes down too. There are videos explaining this.
Good luck
Wow this is super informative, thanks Danny
Clearly explained. Thank you
good content brother , appreciate it 🙏
Perfect Video Bro! Thank you 🙏🏾
Huge question that is leaving me stomped.. so the 25,000 for the car divided by the 5 years (60 Months) equals out to $416.66 a month plus the interest rate of 6 percent equals to 441.66 a month with the interest.. so my question is.. with the apr of 6.16 percent would that 6.16 percent be added on top of the 441.66? To add up to 468.87 a month?
No that’s not how you calculate interest on a loan. Your interest payment is based on the entire loan amount, not the monthly payment amount. To make it easier, you can use this link to figure it all out. An amortization schedule is a table that shows how much interest and principal you’ll pay every month until your loan is paid off: www.amortization-calc.com/auto-car-loan-calculator/
Danny, good video. I only have two questions:
1) Is the Fixed Annual Interest Rate the same as what is referred to as APR (Annual Percentage Rate) ???
2) I ask the above question because I have an auto loan ($30,480 for 60 Months) where the only rate shown on the paperwork is the APR (7.94). I use that rate to plug into your formula and get $617.14 as the monthly payment. Yet the paperwork of the loan shows the amount as $619.18, which is $2.04 difference (greater). Do you or anyone seeing this comment-post, know why there is a difference?
Thanks,
John
so APR is like a one time fee (if fixed) to process the loan.
Correct (if fixed), they just spread the cost over the term of the loan.
Thank you for your video! I'm still a little confused by the world annual in "Annual Percentage Rate" (APR). Does this mean that the APR is something that gets charged per year? For example for each year in a 60 month loan term, is that 6% x 5 years?
I Wish you had this video out 2yrs ago,before I financed my car. Great info,for my next car.THANKS
I will share this with my son. Thanks
So apr is only when you get a loan for a car not when you just buy it w a downpayment and pay monthly ?
I’m not sure I understand your question. If you’re buying a car, use a down payment and pay monthly, that’s still a loan. The more money you put down the lower your monthly payments will be
Thank you for being direct
Thanks; you make it easy to understand. Maybe teaching may have been your calling
APR is annual or for the whole load period say 5 years?
If the APR is fixed, then it’s for the whole term of the loan (like 5 years). If the APR is variable then it can change anytime up or down during the period of the loan. Always try to get a fixed loan if you can to avoid having your rate increase down the road.
@@DannySeeum Thanks for the clarity. Just got a lil confused considering the A in APR stands for Annual.
Thanks danny!
wow perfect ! thanks
Thank you!!!
I have 713 credit and I see like 28% apr way to much I’d say . Why is it so high
Bless brother
What I don’t understand is, why even bother looking at the interest rate then? You’d always want to look at the APR so you don’t miss the fees / charges?
What you’ll see banks advertise in big text on ads is the interest rate and the APR is usually in small print in hopes you don’t notice it. So they’ll try to trick you with a low interest rate vs another bank but get you with a higher APR that you didn’t notice. It helps to look at both to get a sense of how the bank does business. I avoid banks that charge high fees, but at the end the APR is what matters the most to your pockets.
Thankyou
Just what I needed before I got ripped off.
NO IM THE REAL SEEUM