What interest am I paying?
ragin_cajuns
Member Posts: 2
i am trying to figure out what interest i will be paying for a loan for a car.
i am borrowing $12,000 from my mother to buy a car and will pay her back $180 per month for 66 months. She pays me $27 per month for her portion of our phone bill and she will stop paying that to me during this time as the "interest" i will owe her. so 66 months x $27 is $1782 that i will be paying for her for the 66 months. so in the end i will pay back $13,782.
how do i figure out what interest rate that is to know how it compares to what i can get on a loan from the bank?
i am borrowing $12,000 from my mother to buy a car and will pay her back $180 per month for 66 months. She pays me $27 per month for her portion of our phone bill and she will stop paying that to me during this time as the "interest" i will owe her. so 66 months x $27 is $1782 that i will be paying for her for the 66 months. so in the end i will pay back $13,782.
how do i figure out what interest rate that is to know how it compares to what i can get on a loan from the bank?
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Are you borrowing $11880 or $12000?
If you are paying her $207/mo. on a $12000 loan for 66 months: 4.76% APR
If you are paying her $207/mo. on a $11880 loan for 66 months: 5.14% APR (on the $11880)
Of course if it's $11,880 that you are paying her back, then you just took $120 from your Mom... (lol)
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Your 67th payment will only be $206.10.
The APR is approximately 5.25%
Advantages of using Mom Bank?
No lien on the title, making car easier to sell, when the time comes
Something happens to Mom? No more payments!
Need a root canal? "Mom, I don't have the $180 this month"
Disadvantages:
No reporting good payment history to credit agencies.
Typical Mom stuff about your life and expenses
Possible savings with a bank loan (iffy, though)
If you received 4% APR on a bank loan, the payment would be about $7/mo., lower, though you may have extra fees (origination, single payer insurance, lien fees, etc).
I like the Mom idea, assuming you and your Mom are on good terms, and you know you'll pay it back on time.
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Watch your mouth there, Texas.. the "ky" stands for something.
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