Where can I find proper documentations for car financing?
How does it work?
I had a discussion with my friend but we couldn't agree.
How's the interest calculated?
My take is 3% interest for 10 years means 1.03 to the power of
10.
He says it's 3%*10=30%.
But even 1.03 power 10 calculation also not logical.
Cos how can the finance co charge me interest for the original sum
loaned for every year when I start paying already.?
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For illustration ==>
Case 1:
3% per annum for 10 years = 30%
So loan 100K must pay 130K.
Case 2:
3% per annum = 1.03 power 10 =1.34
So loan 100K must pay 134K.
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But since I pay monthly, why must I pay interest for the entire
100K?
Shouldn't it be --->
For eg, I pay X dollars for first year,
then first year interest =100K*1.03=103K
At the end of first year, I owe them 103K - X.
Then 2nd I pay X dollars again.
second yr interest =[(103K-X)*1.03]
At the end of second year , I owe them [(103K-X)*1.03] -X.
So on and so forth..
In fact, the calculations should be monthly since I pay
monthly.
Since I'm paying every month from now , why do they charge me 3%
per annum interest for the entire 100K for 10 years.
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What's ur opinion?