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In a precomputed loan, the interest on the loan is calculated at the beginning of the financing process. Unlike a simple interest loan, it isn’t calculated on a monthly basis. If you’re considering a precomputed loan, keep the following information in mind:
Find out today if a precomputed loan is the right choice for you!
The biggest benefit of a precomputed loan is that you have a clear picture of your payments for the future. With a simple interest loan, your interest is calculated every month, so it will change over the life of the loan. However, if you choose a precomputed loan, you’ll receive a clear payment schedule, and the payments will be the same every month. If you’d prefer a consistent payment plan, a precomputed loan may be right for you.
The precomputed interest formula is the same as the formula used to determine the initial interest rate on a simple interest loan. As we noted, the big difference is that once the precomputed interest rate is determined, it remains the same for the full length of the loan. The starting account balance for a precomputed loan is comprised of the amount to be financed, the origination fee (a fee charged by the lender for drawing up the loan), and the precomputed interest rate. Here is a precomputed loan example to illustrate how it works:
Precomputed Loan Example
A simple interest loan is one of the most common types of car loans, and it offers the following advantages:
As you can see, the main advantage of a simple interest loan is for drivers who pay off their loan early. If you’re planning to make consistent monthly payments over the life of a loan, a precomputed loan is likely a stronger choice.
At Green Light Auto Credit, we can help you decide if a precomputed or a simple interest loan is a better choice for your financing needs. In addition to providing in-depth information on precomputed loans and the precomputed interest formula, we offer the following advantages over other financing providers:
Contact us today to get the ball rolling on a precomputed auto loan!