Dear Terry, I purchased a car and my contract is a simple-interest loan, but I'm not sure what kind of contract this is. Please help! -- IslaDear Isla, Here's Bankrate's definition of a simple-interest loan: A method of allocating the monthly payment between interest and principal. The interest charged is determined by the unpaid principal balance on the loan, the interest rate and the number of days since the last payment. The rest of the payment goes to the principal. Making early payments or additional payments will reduce the loan's principal and cut the total interest paid over the life of the loan.I hope that helps. But in the future, you really should never sign a contract without an explanation of all the terms.Here are this week's reader questions:•High-horsepower cars zoom to extinction•What is a simple-interest loan?•Which Web site lists the best leases?•How can I get my money-back guarantee?If you have a question for Terry, e-mail him at Driving for Dollars. Save money on your car -- sign up for Bankrate's new weekend Car & Money newsletter. advertisementRelated Links:7 best off-to-college carsNational auto loan averagesWhat changes auto loan rates?Related Articles:All new cars for 20105 steps to 'clunker' dealTake the 'cash back?'
Dear Terry, I purchased a car and my contract is a simple-interest loan, but I'm not sure what kind of contract this is. Please help! -- Isla
Dear Isla, Here's Bankrate's definition of a simple-interest loan:
A method of allocating the monthly payment between interest and principal. The interest charged is determined by the unpaid principal balance on the loan, the interest rate and the number of days since the last payment. The rest of the payment goes to the principal. Making early payments or additional payments will reduce the loan's principal and cut the total interest paid over the life of the loan.
I hope that helps. But in the future, you really should never sign a contract without an explanation of all the terms.
If you have a question for Terry, e-mail him at Driving for Dollars. Save money on your car -- sign up for Bankrate's new weekend Car & Money newsletter.