[Jetolso]

Originally Posted by jimbethesda

The logic and math behind loans is the exact same as the interest you earn in a savings account.

Savings account: Current balance * interest rate during the period = interest earned

Loan: Current balance * interest rate during the period = interest expense

Loan payments are not applied to interest or principal, 100% of it is applied to your balance at the time of payment. Most banks use that payment date as the date they apply interest to your balance. That fact confuses people.

They really show redisgn how amortized schedules are presented as many misinterpret it.

The point is - since the term and schedules are fixed, there is no need to calculate the payment distribution that way, there is potential flexibility to do a fixed schedule with fixed monthly interest. That, at face value, is by its own nature less confusing.

By the way, I’m equally tired of the topic as the counterpointers are.

[jimbethesda]

Originally Posted by Jetolso

The point is - since the term and schedules are fixed, there is no need to calculate the payment distribution that way, there is potential flexibility to do a fixed schedule with fixed monthly interest. That, at face value, is by its own nature less confusing.

By the way, I’m equally tired of the topic as the counterpointers are.

They are not fixed. You can pay more in any month which would then reduce the interest accrued in the following month as your balance is lower. Miss a payment and interest will be higher.

I STRONGLY urge you to read books/websites/blogs regarding personal finance. Your future self will be happy you did.

[gs1403]

Originally Posted by Jetolso

The point is - since the term and schedules are fixed, there is no need to calculate the payment distribution that way, there is potential flexibility to do a fixed schedule with fixed monthly interest. That, at face value, is by its own nature less confusing.

By the way, I’m equally tired of the topic as the counterpointers are.

Every bank provides you with an amortization schedule upon request before you sign the dotted line. And even if one didn't, it's your fault for failing to do the most basic due diligence on how interest accrues before taking on five-six figure debt. Wait till you hear about IO bridge loans, balloon financing..etc. There's a lot worse out there than your fully amortizing consumer loan. Stop trying to justify your ignorance with your own contrived views that go against how literally every institutionalized lending system in this country works.

[Jetolso]

Originally Posted by gs1403

Every bank provides you with an amortization schedule upon request before you sign the dotted line. And even if one didn't, it's your fault for failing to do the most basic due diligence on how interest accrues before taking on five-six figure debt. Wait till you hear about IO bridge loans, balloon financing..etc. There's a lot worse out there than your fully amortizing consumer loan. Stop trying to justify your ignorance with your own contrived views that go against how literally every institutionalized lending system in this country works.

No

[Jetolso]

Originally Posted by jimbethesda

They are not fixed. You can pay more in any month which would then reduce the interest accrued in the following month as your balance is lower. Miss a payment and interest will be higher.

I STRONGLY urge you to read books/websites/blogs regarding personal finance. Your future self will be happy you did.

Did it already - personal finance is a low-grade hobby of mine. I think you guys are mistaking ignorance for perhaps activism, for lack of a better word.

[Jetolso]

For all the armchair financial advisors here with clearly no fiduciary tendencies:

See 0:05

[SigmaShift]

Armco was doing 3.45% for 72 last month, it's up to 5.5% now, 5.75% for 82.

[DocWeatherington]

[Jetolso]

Let’s ask ChatGPT :-)

I am actually satisfied with the answers.

Q: Is the amortization schedule of car loans fair to consumers, or does it benefit financial institutions most?

A: An amortization schedule is a table that shows the breakdown of each payment made towards a loan, including the amount applied to principal and interest. It is a standard tool used by financial institutions to calculate and schedule loan payments, including car loans.

Whether an amortization schedule benefits financial institutions or consumers depends on various factors, such as the terms of the loan agreement, interest rates, and fees. In general, car loans tend to be structured in a way that benefits financial institutions more than consumers.

One reason for this is that interest payments are front-loaded in the early years of the loan, meaning that a significant portion of each payment goes towards paying off interest rather than principal. This means that it takes longer for the borrower to build equity in the vehicle, and they may owe more than the car is worth for a significant portion of the loan term.

Another factor is that lenders often include additional fees and charges in the loan agreement, such as origination fees, early repayment penalties, and loan insurance. These fees can add up to a significant amount and can further increase the overall cost of the loan.

That being said, car loans can still be a reasonable financing option for consumers who need a vehicle but cannot afford to pay for it outright. It's important to shop around for the best interest rates and terms and carefully review the loan agreement, including the amortization schedule, before signing on the dotted line. Additionally, making extra payments towards the principal can help reduce the amount of interest paid over the life of the loan and shorten the repayment term.

Q: Would it be fairer to have a fixed principal and interest ratio each month, or is the usual amortization approach most reasonable?

A: Having a fixed principal and interest ratio each month is one alternative to an amortization schedule for calculating loan payments. With this approach, the amount of principal and interest paid each month remains the same throughout the life of the loan, making it easier for borrowers to plan and budget their payments.

However, this approach may not be as beneficial to financial institutions, as they would not be able to front-load the interest payments as they can with an amortization schedule. As a result, lenders may be less inclined to offer loans on these terms.

From a consumer perspective, a fixed principal and interest ratio each month may be more transparent and easier to understand. Borrowers would know exactly how much they owe each month and how much of their payment goes towards principal and interest. This can be helpful for budgeting and planning purposes, and can also help borrowers avoid unexpected increases in their monthly payments due to fluctuations in interest rates.

Ultimately, whether a fixed principal and interest ratio or an amortization schedule is fairer to consumers depends on the specific terms of the loan agreement and the borrower's individual circumstances. It's important for borrowers to carefully review all aspects of a loan agreement before signing and to consider their own financial situation and goals when choosing a loan.

[Shaneartistry]

Originally Posted by Jetolso

Let’s ask ChatGPT :-)

I am actually satisfied with the answers.

Q: Is the amortization schedule of car loans fair to consumers, or does it benefit financial institutions most?

A: An amortization schedule is a table that shows the breakdown of each payment made towards a loan, including the amount applied to principal and interest. It is a standard tool used by financial institutions to calculate and schedule loan payments, including car loans.

Whether an amortization schedule benefits financial institutions or consumers depends on various factors, such as the terms of the loan agreement, interest rates, and fees. In general, car loans tend to be structured in a way that benefits financial institutions more than consumers.

One reason for this is that interest payments are front-loaded in the early years of the loan, meaning that a significant portion of each payment goes towards paying off interest rather than principal. This means that it takes longer for the borrower to build equity in the vehicle, and they may owe more than the car is worth for a significant portion of the loan term.

Another factor is that lenders often include additional fees and charges in the loan agreement, such as origination fees, early repayment penalties, and loan insurance. These fees can add up to a significant amount and can further increase the overall cost of the loan.

That being said, car loans can still be a reasonable financing option for consumers who need a vehicle but cannot afford to pay for it outright. It's important to shop around for the best interest rates and terms [...]

AI man. We’re all doomed.

[xxdachosen1xx]

My credit union is doing 3.49%

[BMWCali]

Originally Posted by xxdachosen1xx

My credit union is doing 3.49%

Thanks! But looks like they forgot to update their landing page. Their rates page doesn't even show 72 months. Max is 60 months and it's 5.84% for used! https://www.envisioncu.com/Education/Resources/Rates

[BMWCali]

Originally Posted by Soden82

Haven’t read into most of the banter, but OP you can try lightstream, DCU, or one of those smaller credit unions.

I financed my M through lightstream for 84 mo with an unsecured loan (I got to keep the title and the car) and it was 5.5% interest.

I decided to do 84 mo because I knew I was going to make double payments (and use the cash from the previous car I sold) to pay off the loan in 2.25 years. But if I fell on hard times, it’s nice to know that I can pay a small monthly payment until I get my finances settled.

Smart on the last point. And thanks! But Lightsteam is currently an astonishing 10.99% for 84m auto purchase from a dealer (not much better at 8.99% for 60m). And DCU is 8.24%. https://www.dcu.org/borrow/vehicle-l...tml#auto-rates

[xxdachosen1xx]

Check Guardian credit union, they're based out of South FL. They could be in the same camp of not updating their page, however it's digging into. https://www.guardianscu.coop/loans/vehicles/

[Soden82]

Originally Posted by BMWCali

Smart on the last point. And thanks! But Lightsteam is currently an astonishing 10.99% for 84m auto purchase from a dealer (not much better at 8.99% for 60m). And DCU is 8.24%. https://www.dcu.org/borrow/vehicle-l...tml#auto-rates

Holy smokes. What the heck happened.

I wonder if it was because my car was purchased private sale not through the dealership.

Still a massive bummer though.

[xxdachosen1xx]

Hey everyone, I called my credit union and validated their finance promo. They are offering 3.5% interest for 72 months, no payments for 90 days. 🤯🤯 This is by far the best rate they’ve seen.

[Vitacura]

Originally Posted by xxdachosen1xx

Hey everyone, I called my credit union and validated their finance promo. They are offering 3.5% interest for 72 months, no payments for 90 days. ���� This is by far the best rate they’ve seen.

This got me really excited to refinance my loan, then I read that membership is based on living or working in certain FL/GA counties. I reached out asking about joining nonetheless.

[dmand]

Originally Posted by Vitacura

This got me really excited to refinance my loan, then I read that membership is based on living or working in certain FL/GA counties. I reached out asking about joining nonetheless.

...and they shot you down? I even live in GA and was sad to see the county requirements. Lowest 72 month rate I've seen that doesn't otherwise have requirements has been 5.64% at Penn Fed and Consumers Credit Union. The latter also had 84 months at 6.24%.

Good discussion guys! I love finding good deal in the heat of this garbage economy!

[cubanbimmer3]

Going to lock in a rate by tomorrow as well. Question, does BMWFS/CUs have to do a hard credit check before giving you a rate estimate? I.e. are you guys that are shopping around having your credit pulled every time you ask for a loan rate?

[vj123]

Originally Posted by cubanbimmer3

Going to lock in a rate by tomorrow as well. Question, does BMWFS/CUs have to do a hard credit check before giving you a rate estimate? I.e. are you guys that are shopping around having your credit pulled every time you ask for a loan rate?

Based on the credit history, most people go by the base rates published online by respective lenders for an estimate.

[OtoPA]

Signed yesterday at 5.1 w/ BMW for 100K @60mon.

[Jetolso]

Gonna go cash this time unfortunately