Anyone here good with calculating loan payments?

GooseMan · 02-21-2007, 03:44 PM

I have a $25,000 business loan from the bank to pay for my car. I bought my car in the US, so the only way to pay for it was a loan from the bank.

The term is 60 months, at a rate of 8.00%

I was told my payments are to be $416/month. But after a quick calculation, thats what it would be at 0% interest ($25K / 60 = $416.67)

For some reason, the bank is taking $416.67 and on top of that, another $170 each month from my account

According to the loan calculator on THEIR SITE, it clearly states I should be paying a total of $507.00 / mo

Is there something I'm not calculating correctly? I dont get it!

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Matt A · 02-21-2007, 03:46 PM

uh, yep. 8% for 60 months for 25K is 506.91

and 0% is 416.67

cwb124 · 02-21-2007, 03:47 PM

Yeah I would call them immediately and demand an explanation.

WRXGuyInUSA · 02-21-2007, 03:47 PM

You got hosed, eh?

avk · 02-21-2007, 03:50 PM

Check the paperwork.

GooseMan · 02-21-2007, 03:51 PM

Quote:

Originally Posted by cwb124

Yeah I would call them immediately and demand an explanation.

left em a message a few hours ago...I'm just wondering if it the interest is calculated annualy...or what!

gte123v · 02-21-2007, 03:51 PM

is this cannadian dollars?

GooseMan · 02-21-2007, 03:52 PM

Yes...but it doesnt matter..the math is still the same

gte123v · 02-21-2007, 03:54 PM

Quote:

Originally Posted by GooseMan

Yes...but it doesnt matter..the math is still the same

I thought the bank loaned you $25,000 US dollars and you are paying back cannadian dollars. I thought maybe they are doing the conversion which will make your payment in cannadian dollars about 416+170 = 586. Not too sure if that's what they are doing.

GooseMan · 02-21-2007, 03:57 PM

nono...

well, my friend just figured it out. It's because I'm paying 8.00% interest PER ANNUM...so its $2000/year x 5 years = $10,000

So it comes out to $35,000 / 60 = $583.....now it makes sense...

Now I'm pissed

gte123v · 02-21-2007, 03:59 PM

^^^WOW, talk about a RIP OFF!

Thaddy · 02-21-2007, 03:59 PM

So wait, they loaned you $25,000 and you're paying back $35,000? I'd be pissed too.

sonicblue · 02-21-2007, 04:00 PM

Calculation:
Define:

i = periodic interest rate (for monthly, just take the APR divided by 12; may not be EXACT if some funky compounding but should be very close

v = 1 / (1 + i )

n = number of periods (payments)

Define a = [ 1 - v^n ] / i

PMT = LOAN AMT / a

For you:

i = .08/12
v = 1 / (1+.08/12)
n = 60
a = about 49.3

25,000 / 49.3 = ~$507

CN: what they said, but just to prove it and/or let you adapt to a change in terms down the road

EDIT: sounds like you're paying "simple" vs. compound interest

whpotter · 02-21-2007, 04:01 PM

Seems that the loan period is 50 versus 60 months.

f4phantomii · 02-21-2007, 04:02 PM

I have a sample "offer" spreadsheet for an STi.

It goes through all the costs, including taxes, etc. You can input the loan amount, interest rate, etc. It will tell you the monthly payment.

It's pretty self explanatory.

LINK

EDIT: Which is why you should be armed with aforementioned spreadsheet so you know *exactly* how much your payment should be before you sign anything. That way, if the dealer's numbers don't match yours within a dollar or so, you immediately know something is wrong.

I've used this thing to buy three vehicles now....once the dealer sees you got your stuff together, they generally don't screw with you.

The only time I didn't use it was for my first car. Luckily, my dad used a cruder method but didn't tell me to teach me a lesson. Just before I finished signing everything, he piped up and said something was wrong. Turned out the dealer had tried to screw me out of a $1000 rebate hoping I was too young and stupid (I was) to notice. The dealer pretended it was an "honest oversight" and got it corrected.

GooseMan · 02-21-2007, 04:08 PM

Yeah, all the loan calculators say $507....but thats if the 8% is caclulated over the entire 60 month period.

What I'm seeing is 8% per YEAR (so $25K x 0.08 = $2000... x 5 years = $10K!!)

Who the hell calculates a loan like this?

sonicblue · 02-21-2007, 04:14 PM

Quote:

Originally Posted by GooseMan

Yeah, all the loan calculators say $507....but thats if the 8% is caclulated over the entire 60 month period.

What I'm seeing is 8% per YEAR (so $25K x 0.08 = $2000... x 5 years = $10K!!)

Who the hell calculates a loan like this?

Like I said, I believe it's just matter of using "simple" interest, so named because the monthly interest you pay each month is "simply" determined by your monthly periodic rate (.08/12) against your borrowed balance ($25K). =.08/12*25000 = $167. I agree it's rare, but it's an old - not new - way of doing it, I think.

jds · 02-21-2007, 04:21 PM

(reading comprehension > me)

You took a $25,000 loan for 5 years at an APR (Annual Percentage Rate) of 8%.
Excel's PMT() function says the payments should be $506.92. (P&I)

Your bank is doing something weird.

From the help file:
PMT

Calculates the payment for a loan based on constant payments and a constant interest rate.

Syntax

PMT(rate,nper,pv,fv,type)

For a more complete description of the arguments in PMT, see the PV function.

Rate is the interest rate for the loan.

Nper is the total number of payments for the loan.

Pv is the present value, or the total amount that a series of future payments is worth now; also known as the principal.

Fv is the future value, or a cash balance you want to attain after the last payment is made. If fv is omitted, it is assumed to be 0 (zero), that is, the future value of a loan is 0.

Type is the number 0 (zero) or 1 and indicates when payments are due.

Set type equal to If payments are due
0 or omitted At the end of the period
1 At the beginning of the period

Indocti Discant · 02-21-2007, 04:27 PM

sounds like your bank is making you pay interest on the PV for the life of the loan like you said. thats the most usuristic thing evAr. muslims do not approve. they declare jihad on your bank.

WRXVT · 02-21-2007, 04:51 PM

Quote:

Originally Posted by sonicblue

Like I said, I believe it's just matter of using "simple" interest, so named because the monthly interest you pay each month is "simply" determined by your monthly periodic rate (.08/12) against your borrowed balance ($25K). =.08/12*25000 = $167. I agree it's rare, but it's an old - not new - way of doing it, I think.

i don't think that's the right answer.... are you sure?

I think this:

simple interest would not result in paying $80/month more... the interest still needs to be applied only on the outstanding balance... which is amortized over 60 months. So when that balance is going down, the interest should go down as well. Simple interest doesn't mean you get ripped off to the tune of $80*60 $4800... that doesn't make sense to me.

Wagon Of Fury · 02-21-2007, 05:00 PM

Soooo, you went through the hassle of grey-marketing a car, which may or may not have warranty coverage, and now the financing deal has evaporated any money that you saved by doing so.

Am I missing something ?

elucas730 · 02-21-2007, 05:04 PM

How about you just call them up and find out. Maybe they made a mistake.

sonicblue · 02-21-2007, 05:06 PM

Quote:

Originally Posted by WRXVT

i don't think that's the right answer.... are you sure?

I think this:

simple interest would not result in paying $80/month more... the interest still needs to be applied only on the outstanding balance... which is amortized over 60 months. So when that balance is going down, the interest should go down as well. Simple interest doesn't mean you get ripped off to the tune of $80*60 $4800... that doesn't make sense to me.

When a loan with compound interest is calculated, the amount you pay in interest each month changes but the payments are calculated to be level each period. So, you pay a lot of interest in the first payment and very little in the last payment. It's difficult to calculate because you need a single number that, over the whole period, will work out to pay the principal to $0 as interest is compounded monthly or whatever. Whether you pay less interest overall is completely dependent on knowing ALL the terms of the simple vs. compound.

For a simple interest loan, it's much "simpler." For each payment, the interest amount is constant. It could be anything; in this case, it appears to have been defined as 8% of the starting balance, so $167 each month. The principal part of the payment is simply the loan amount / 60 = $417. Total payment = 167 + 417 = 583. Simple to calculate, hence the name.

Compound interest: constant interest rate (relative to your outstanding balance at each period)
Simple interest: constant interest amount

/class

GooseMan · 02-21-2007, 05:12 PM

sonic--that sounds EXACLTY how it is...thats why theyre taking two payments from my account...one for $416.67, and another for $167 (which says "INT D/L")

Wagon_From_Hell--well....that was not the plan!

sonicblue · 02-21-2007, 05:14 PM

Glad I could help out, Goose, but sorry they pulled some wool on ya'. Refi?

02-21-2007, 03:44 PM	#1
GooseMan Scooby Specialist Member#: 2462 Join Date: Sep 2000 Chapter/Region: SCIC Location: Los Angeles/Montreal Vehicle: 2012 Volvo S60 T5 2005 Triumph Sprint ST	Anyone here good with calculating loan payments? I have a $25,000 business loan from the bank to pay for my car. I bought my car in the US, so the only way to pay for it was a loan from the bank. The term is 60 months, at a rate of 8.00% I was told my payments are to be $416/month. But after a quick calculation, thats what it would be at 0% interest ($25K / 60 = $416.67) For some reason, the bank is taking $416.67 and on top of that, another $170 each month from my account According to the loan calculator on THEIR SITE, it clearly states I should be paying a total of $507.00 / mo Is there something I'm not calculating correctly? I dont get it! * Registered users of the site do not see these ads.

02-21-2007, 04:02 PM	#15
f4phantomii Scooby Specialist Member#: 58504 Join Date: Mar 2004 Chapter/Region: South East Location: Ready to try OpenECU.org!!! Vehicle: 2004 STi w/o wing Aspen White / Silver	I have a sample "offer" spreadsheet for an STi. It goes through all the costs, including taxes, etc. You can input the loan amount, interest rate, etc. It will tell you the monthly payment. It's pretty self explanatory. LINK EDIT: Which is why you should be armed with aforementioned spreadsheet so you know exactly how much your payment should be before you sign anything. That way, if the dealer's numbers don't match yours within a dollar or so, you immediately know something is wrong. I've used this thing to buy three vehicles now....once the dealer sees you got your stuff together, they generally don't screw with you. The only time I didn't use it was for my first car. Luckily, my dad used a cruder method but didn't tell me to teach me a lesson. Just before I finished signing everything, he piped up and said something was wrong. Turned out the dealer had tried to screw me out of a $1000 rebate hoping I was too young and stupid (I was) to notice. The dealer pretended it was an "honest oversight" and got it corrected. Last edited by f4phantomii; 02-21-2007 at 04:09 PM.

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02-21-2007, 03:46 PM	#2
Matt A NASIOC Vendor Manager Member#: 15382 Join Date: Feb 2002 Chapter/Region: NESIC Location: Cambridge, MA Vehicle: . 2005 OBXT LTD 2002 WRX (for sale!)	uh, yep. 8% for 60 months for 25K is 506.91 and 0% is 416.67

02-21-2007, 03:47 PM	#3
cwb124 Scooby Specialist Member#: 15571 Join Date: Feb 2002 Location: Not where you think Vehicle: 2006 06 Forester XT Silver	Yeah I would call them immediately and demand an explanation.

02-21-2007, 03:47 PM	#4
WRXGuyInUSA Scooby Specialist Member#: 13967 Join Date: Jan 2002 Chapter/Region: SCIC Location: Nunya Vehicle: Bye Bye STI!!!	You got hosed, eh?

02-21-2007, 03:50 PM	#5
avk Scooby Specialist Member#: 17252 Join Date: Apr 2002 Chapter/Region: Tri-State Location: NJ Vehicle: '06 WX8 59E	Check the paperwork.

02-21-2007, 03:51 PM	#7
gte123v Scooby Specialist Member#: 114481 Join Date: May 2006 Location: Atlanta Vehicle: 2006 Sti WRB	is this cannadian dollars?

02-21-2007, 03:52 PM	#8
GooseMan Scooby Specialist Member#: 2462 Join Date: Sep 2000 Chapter/Region: SCIC Location: Los Angeles/Montreal Vehicle: 2012 Volvo S60 T5 2005 Triumph Sprint ST	Yes...but it doesnt matter..the math is still the same

02-21-2007, 03:57 PM	#10
GooseMan Scooby Specialist Member#: 2462 Join Date: Sep 2000 Chapter/Region: SCIC Location: Los Angeles/Montreal Vehicle: 2012 Volvo S60 T5 2005 Triumph Sprint ST	nono... well, my friend just figured it out. It's because I'm paying 8.00% interest PER ANNUM...so its $2000/year x 5 years = $10,000 So it comes out to $35,000 / 60 = $583.....now it makes sense... Now I'm pissed

02-21-2007, 03:59 PM	#11
gte123v Scooby Specialist Member#: 114481 Join Date: May 2006 Location: Atlanta Vehicle: 2006 Sti WRB	^^^WOW, talk about a RIP OFF!

02-21-2007, 03:59 PM	#12
Thaddy Scooby Specialist Member#: 128109 Join Date: Oct 2006 Chapter/Region: MAIC Location: Pittsburgh Vehicle: 2011 E82 135i Alpine White	So wait, they loaned you $25,000 and you're paying back $35,000? I'd be pissed too.

02-21-2007, 04:00 PM	#13
sonicblue Scooby Specialist Member#: 25227 Join Date: Sep 2002 Chapter/Region: Tri-State Location: Oh st I ain't from Brooklyn! Vehicle:** 2006 Kodo Homage Dark Titanium	Calculation: Define: i = periodic interest rate (for monthly, just take the APR divided by 12; may not be EXACT if some funky compounding but should be very close v = 1 / (1 + i ) n = number of periods (payments) Define a = [ 1 - v^n ] / i PMT = LOAN AMT / a For you: i = .08/12 v = 1 / (1+.08/12) n = 60 a = about 49.3 25,000 / 49.3 = ~$507 CN: what they said, but just to prove it and/or let you adapt to a change in terms down the road EDIT: sounds like you're paying "simple" vs. compound interest

02-21-2007, 04:01 PM	#14
whpotter Scooby Newbie Member#: 45302 Join Date: Oct 2003 Location: Trussville AL Vehicle: 2003 WRX Wagon Midnight Black Pearl	Seems that the loan period is 50 versus 60 months.

02-21-2007, 04:08 PM	#16
GooseMan Scooby Specialist Member#: 2462 Join Date: Sep 2000 Chapter/Region: SCIC Location: Los Angeles/Montreal Vehicle: 2012 Volvo S60 T5 2005 Triumph Sprint ST	Yeah, all the loan calculators say $507....but thats if the 8% is caclulated over the entire 60 month period. What I'm seeing is 8% per YEAR (so $25K x 0.08 = $2000... x 5 years = $10K!!) Who the hell calculates a loan like this?

02-21-2007, 04:21 PM	#18
jds Scooby Newbie Member#: 7991 Join Date: Jul 2001 Chapter/Region: RMIC Location: Littleton CO.	(reading comprehension > me) You took a $25,000 loan for 5 years at an APR (Annual Percentage Rate) of 8%. Excel's PMT() function says the payments should be $506.92. (P&I) Your bank is doing something weird. From the help file: PMT Calculates the payment for a loan based on constant payments and a constant interest rate. Syntax PMT(rate,nper,pv,fv,type) For a more complete description of the arguments in PMT, see the PV function. Rate is the interest rate for the loan. Nper is the total number of payments for the loan. Pv is the present value, or the total amount that a series of future payments is worth now; also known as the principal. Fv is the future value, or a cash balance you want to attain after the last payment is made. If fv is omitted, it is assumed to be 0 (zero), that is, the future value of a loan is 0. Type is the number 0 (zero) or 1 and indicates when payments are due. Set type equal to If payments are due 0 or omitted At the end of the period 1 At the beginning of the period

02-21-2007, 04:27 PM	#19
Indocti Discant Scooby Specialist Member#: 138000 Join Date: Jan 2007 Chapter/Region: BAIC Location: San Francisco Vehicle: Teri Ma	sounds like your bank is making you pay interest on the PV for the life of the loan like you said. thats the most usuristic thing evAr. muslims do not approve. they declare jihad on your bank.

02-21-2007, 05:00 PM	#21
Wagon Of Fury Scooby Newbie Member#: 47982 Join Date: Nov 2003 Chapter/Region: Tri-State	Soooo, you went through the hassle of grey-marketing a car, which may or may not have warranty coverage, and now the financing deal has evaporated any money that you saved by doing so. Am I missing something ?

02-21-2007, 05:04 PM	#22
elucas730 Scooby Specialist Member#: 42714 Join Date: Sep 2003 Chapter/Region: Tri-State Location: Apalachin, NY Vehicle: '07 BMW 335i E90	How about you just call them up and find out. Maybe they made a mistake.

02-21-2007, 05:12 PM	#24
GooseMan Scooby Specialist Member#: 2462 Join Date: Sep 2000 Chapter/Region: SCIC Location: Los Angeles/Montreal Vehicle: 2012 Volvo S60 T5 2005 Triumph Sprint ST	sonic--that sounds EXACLTY how it is...thats why theyre taking two payments from my account...one for $416.67, and another for $167 (which says "INT D/L") Wagon_From_Hell--well....that was not the plan!

02-21-2007, 05:14 PM	#25
sonicblue Scooby Specialist Member#: 25227 Join Date: Sep 2002 Chapter/Region: Tri-State Location: Oh st I ain't from Brooklyn! Vehicle:** 2006 Kodo Homage Dark Titanium	Glad I could help out, Goose, but sorry they pulled some wool on ya'. Refi?