What is a Simple Interest Loan?

Posted: Thursday, May 26th, 2016

Are you shopping around for an auto loan? The kind of loan that you’ll most likely encounter when shopping for financing for your next car is a simple interest loan. This loan is called “simple” because it is not compounded. That’s a good thing, because it means that your interest is calculated using only the remaining outstanding principal balance. Read on to learn all about simple interest loans here at Green Light Auto Credit.

Simple Interest Car Loans

Nearly every car loan you find will be a simple interest loan. Other kinds of auto loans do exist, but you should avoid them – they will generally cost you more than simple interest. A simple interest loan is easy to understand. You pay your regular monthly payment, plus the interest as calculated based on the balance.

How They’re Calculated

You don’t have to be an accountant to calculate simple interest. Essentially, you’ve got your interest rate – usually somewhere between 3 and 10 percent, depending on your credit – you’ve got your principal balance, and you’ve got your loan term, which is how long it will take to pay off the loan. If you purchase a car for $10,000, and your interest rate is 6%, and your monthly payment is $250, your first payment of $250 will be made up of $50 interest and $200 will go to pay down the principal. Your next payment will be $49 of interest and $201 will go to the principal, and so on.

Let Green Light Credit Help

If you’re trying to better understand car loans, then turn to the experts here at Green Light Auto Credit. We specialize in providing auto loans and financing to buyers of all kinds, and we can help you get a handle on financing your next vehicle purchase!

Find the Simple Interest Loan You Need at Green Light Auto Credit

Contact Green Light Auto Credit online now or give us a call at (800) 200-5551 with any questions about how to acquire a simple interest loan and get started on financing your next auto purchase. We are happy to help you get behind the wheel of your next car with a low interest simple interest auto loan to help pay for it!