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Old 03-19-2017, 11:31 AM   #57
Drives: 2011 Camaro SS
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Originally Posted by Snoman View Post
Simply incorrect sir, the "fixed rate" never changes and while payments might be made monthly, interest is compounded daily and readjusted daily.
Interest RATE is fixed, it is not recalculated. Principal balance is recalculated. Go back and read what you first said, that the RATE is recalculated daily.

Again, compounding interval and method makes no difference on small short term loans like a car note. The difference between any major bank is going to be less than the cost of a Starbucks coffee over the life of the loan

Hence the advertising "we'll give you a 3% loan then in small print the loan institution may or may not tell you about something they refer to as "effective rate of 3.25%"
Effective rate also includes origination fees, which are significantly more important than compounding intervals. I've already shown you the differences.

If you want to figure a given rate for yourself, you can do it easily here:

Second, your daily interest rate goes steadily down instead of up.
Once again, the RATE is steady. The principal balance changes.

In your oddball daily payment plan, the savings is coming from reducing the principal amount earlier. The interest applied is less because the principal is less, not some oddball accounting trick. You'll also likely to find you're making extra payments, much like bi-weekly results in more principal deduction than twice monthly of the same amount because bi-weekly results in 26 payments vs 24.

I'm not an accountant, but was an accounting minor and did take the classes through the 300 level. It's been awhile, but this is simple stuff. Folks can listen to who ever they like, there's plenty of simple online calculators if you don't know the formulas, and if you learn to read the loan (or investment) documents, it's honestly not tough to compare loans without much of an understanding of the underlying principals. It's done so on purpose, to make it easy to compare, hence the requirement to give APY as well as APR, etc.
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Old 03-19-2017, 11:41 AM   #58
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Originally Posted by BehindBlueI's View Post
....did take the classes through the 300 level...
I can prove my math all day long as I'm in the industry. One of the greatest mis-nomenclatures about loans is that the math surrounding compounding interest matches the timing of payments (false). It almost never does because there are no laws regulating it and the calc is abused by institutions in their favor. Generally speaking, I'll simply agree we're likely talking about the same thing from two different perspectives and blame the text medium for the level of detail I'm unable to get you to see.

I will however, challenge you to take any of your loans (other than mortgage) and pay them daily one month. Then go log into your online account and see the difference. There is simply no scenario in which paying monthly on a loan is justifiable.
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