At Universal Financial Company, we keep it simple
There are many different ways to calculate interest. At Universal Financial Company, we provide you with simple interest loans, so you can pay it back in the form of affordable monthly payments. Simple interest is known as such because it’s calculated based on your principal balance, which is the amount you owe on your loan. Generally, it saves the borrower money because it does not compound on interest; your interest rate will stay the same during the lifetime of the loan.
What am I paying for each month?
Your interest rate will always stay the same, but the amount of money that goes to paying down principal versus the amount of money that goes to interest changes every month. In simpler terms, most of the payment at the beginning of the loan goes toward interest; at the end, most of it goes toward your principal balance. At the same time, however, your monthly payment always remains the same for the loan period. Although you are paying more interest at the beginning of your loan, at the end of the day your monthly payment stays the same.
What is APR?
APR stands for Annual Percentage Rate. It’s just a fancy term used to describe the cost of financing your car over a year including fees and interest accrued. Your APR will always be equal to or higher than your interest rate. They can be useful to compare rates among different lenders because they reflect the total cost of financing rather than just your interest rate.
How can I reduce my interest payments?
By paying extra in the form of early and unscheduled payments, you can pay down the principal balance on your loan sooner which will reduce the total amount toward interest charges over the course of your loan. By doing this, you might also be able to pay back your loan faster than originally planned. Regardless, you should always pay your loan payments on time. Even if you do make unscheduled payments toward your principal, you are still responsible for making your scheduled payments!
Where can I learn more about my loan?
If you’d like more information on simple interest auto loans, here is a more extensive article explaining how car loan interest works.