Learning the difference between revolving and installment credit can help you pick the best way to borrow money for your needs. Understanding these credit options makes it easier to manage your finances and make wise choices.
Log in Anson He 8 months agoPosted 8 months ago. Direct link to Anson He's post “in the chart displaying i...” in the chart displaying installment credit terms, the total interest is $1280 instead of 8% of the principal $10,000. The section above says that compound interest only applies to revolving credit and installments use simple interest. If this is the case, why does the interest in the example owe $1280 instead of $800? • (7 votes) Elvira (Elly) 8 months agoPosted 8 months ago. Direct link to Elvira (Elly)'s post “First thing to point out ...” First thing to point out is that the loan is for 3 years (36 months). The calculation of owing $800 in interest would assume that there were no payments made the entire first year, but in reality that is not the case. The loan amount is decreasing every month, and then interest is calculated on the loan amount remaining for the next 36 months. This results in interest decreasing each month, too. (7 votes) HollyM 4 months agoPosted 4 months ago. Direct link to HollyM's post “do we really need money w...” do we really need money why or why not • (3 votes) David Alexander 4 months agoPosted 4 months ago. Direct link to David Alexander's post “We all produce something,...” We all produce something, and we all need stuff. We don't all produce all the stuff we need. In a cashless economy, you would produce some things in surplus of your needs which you would trade with other people for the extra things that you need but don't produce. Imagine that you grow bananas, more than you need for eating. Bananas spoil if you keep them too long, so you trade your bananas for shoes. OK. that works. But if, when you need shoes, the person who makes them doesn't want your bananas, what are you going to do? Money is one way of representing the value of your bananas, and the doctor's way of representing the value of her expertise and ability. We need money because it represents the value of what we produce. (1 vote) Tiger1951 7 months agoPosted 7 months ago. Direct link to Tiger1951's post “What is a lump sum paymen...” What is a lump sum payment? • (1 vote) David Alexander 7 months agoPosted 7 months ago. Direct link to David Alexander's post “A lump-sum payment is whe...” A lump-sum payment is when something is paid off completely all at once, rather than in several payments over a period of time. (3 votes) IsaccG 21 days agoPosted 21 days ago. Direct link to IsaccG's post “in the chart displaying i...” in the chart displaying installment credit terms, the total interest is $1280 instead of 8% of the principal $10,000. The section above says that compound interest only applies to revolving credit and installments use simple interest. If this is the case, why does the interest in the example owe $1280 instead of $800? • (1 vote) Elvira (Elly) 20 days agoPosted 20 days ago. Direct link to Elvira (Elly)'s post “The simplest answer is be...” The simplest answer is because you are making payments from month 1, so your balance is decreasing every month. And interest is calculated on the balance, so as you are paying it off, you are paying less and less interest. Hope that helps. (2 votes) crunchycat09 15 days agoPosted 15 days ago. Direct link to crunchycat09's post “how did they calculate t...” how did they calculate the monthly payment of $313.36? From what I calculated $313.36 is with interest. • (1 vote) blue 16 hours agoPosted 16 hours ago. Direct link to blue's post “Why do early payments res...” Why do early payments result in a fee? • (1 vote) Michael Jordan 20 hours agoPosted 20 hours ago. Direct link to Michael Jordan's post “so when I pay the bank ba...” so when I pay the bank back money and i accidentally overpay do I lose all of that money and have no chance to get it back? • (1 vote) David Alexander 17 hours agoPosted 17 hours ago. Direct link to David Alexander's post “The bank is licensed to o...” The bank is licensed to operate honestly and in good faith. Your over payment will be refunded to you. (1 vote) Oliver Le 6 months agoPosted 6 months ago. Direct link to Oliver Le's post “(1)What is the minimum pa...” (1)What is the minimum payment of the revolving payment here? Does that mean we need to pay a threshold of money to pay less interest than the APR or would it still be the same? (2) Another question is that if the minimum payment is $10. Hypothetically, if I bought one thing in that month that only costs $5, I would not be able to pay? • (1 vote) David Alexander 6 months agoPosted 6 months ago. Direct link to David Alexander's post “You're not going to pay l...” You're not going to pay less interest than the APR if you keep the money out past the due date or if you make a late payment. The APR is the minimum interest paid by big corporations. Since you and I aren't big or corporate, we can't get lower than that. The minimum payment is "the minimum based on how much you owe". It covers the interest on the loan and not much else. If you're dealing in penny-ante stuff like $5 and $10, you shouldn't have to worry about that. (1 vote) zscholl1 3 months agoPosted 3 months ago. Direct link to zscholl1's post “why now we can use it the...” why now we can use it the maney pay you back now • (0 votes) mylea.b.912 5 months agoPosted 5 months ago. Direct link to mylea.b.912's post “Why are early fees/overpa...” Why are early fees/overpayment fees a thing? Wouldn't that be seen as a good thing? • (0 votes) David Alexander 5 months agoPosted 5 months ago. Direct link to David Alexander's post “A bank is a profit-making...” A bank is a profit-making business. It issues credit cards in order to make money for the investors who own stock in the business. The credit cards are for YOUR convenience, but also for the profit of the bank and the dividends that the bank pays to its investors. When a bank finds a way to legally take money from you, by creating a fee for operating outside of the credit card contract that you signed with the bank, then the bank is doing what it is there to do, make profit for the investors. Whether paying early or overpaying is a good thing or not, the bank sees your "violation" of the contract as an opportunity to get something for its stockholders. (2 votes)Want to join the conversation?
From what I understand from the comments, the interest is calculated from the month's remaining balance. I'm confused where 8% interest is coming from.
