What interest am I paying?

ragin_cajunsragin_cajuns Member Posts: 2
edited June 2016 in General
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?

Comments

  • kyfdxkyfdx Moderator Posts: 197,641

    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?

    $180 X 66 = $11880.

    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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  • ragin_cajunsragin_cajuns Member Posts: 2
    it's 12000 that i'm paying back (plus the $27 x 66). 66 months was rounded obviously. its 66.xxxx something. thanks
  • kyfdxkyfdx Moderator Posts: 197,641

    it's 12000 that i'm paying back (plus the $27 x 66). 66 months was rounded obviously. its 66.xxxx something. thanks

    Okay.. let's base it on 67 payments of $180+$27 = $207/mo.
    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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  • thebeanthebean Parts UnknownMember Posts: 1,156
    This situation is usually the basis for 4-5 cases on Judge Judy every season.  Normally, the payments stop and Mom repo's the car and hilarity follows.  Extra points if they are from Kentucky or Tennessee. B)
    2015 Honda Accord EX, 2019 Honda HR-V EX
  • kyfdxkyfdx Moderator Posts: 197,641
    thebean said:

    This situation is usually the basis for 4-5 cases on Judge Judy every season.  Normally, the payments stop and Mom repo's the car and hilarity follows.  Extra points if they are from Kentucky or Tennessee. B)


    Watch your mouth there, Texas.. the "ky" stands for something. ;)

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  • thebeanthebean Parts UnknownMember Posts: 1,156
    kyfdx said:
    Watch your mouth there, Texas.. the "ky" stands for something. ;)
    LOL.  You're right - I don't want to let my elephant mouth overload my hummingbird rear-end.   :s
    2015 Honda Accord EX, 2019 Honda HR-V EX
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