Whether you have good credit or bad credit, interest payments on installment loans can be very challenging, and learning how to pay lower interest rates on installment loans is always beneficial. When you are suffering from bad credit, payday loans may be a mainstay, and in those cases, it is important to use a loan facilitator if you want to pay lower interest rates for instant cash advance loans.
For long-term installment loans, the accrued interest over the course of time can be even more costly, and ultimately add almost as much to the principal loan amount as the original loan value. A 15 year mortgage installment loan will result in substantially lower interest rates, even though the bottom line payments are higher. The key to paying lower amounts of interest, regardless of what the current interest rates for installment loans may be, is to negotiate the terms of the loan.
1 What is the Principal or Principal Amount of a Loan?
The principal amount is the actual amount borrowed. Maybe you are just wanting to find a $50 payday loan or maybe you want to make a slightly larger dip, getting a two or even maybe $5000 cash advance loan. In terms of installment loans, the principal amount is the actual amount being borrowed, regardless of the terms of the loan.
2 What is the Interest on a Loan?
The interest on any loan is the amount the lender will earn from the loan, above and beyond the repayment of the principal loan value. There are different types of interest for installment loans. The most common types of interest are based on either flat rates or amortized loans accruing interest.
2.1 Flat interest rates payments are where the interest is based on a simple percentage of the principal loan amount. It is called a flat interest rate because it never varies over the course of the loan.
2.2 Accrued interest rate payments are based on the outstanding balance of the principal loan amount and the interest is accrued or added on a certain date, based on a percentage of the remaining balance of the principal.
Some installment loans and lenders will allow you to negotiate the interest rates, but this is generally relegated to friends and family who are kind enough to loan you money, but still not against earning a little for themselves at the same time. If you want to successfully negotiate lower interest rates for installment loans, there are some options, though not so much in terms of negotiations.
In the case of buying a house or a car, you can get a lower interest rate by providing a larger down payment and financing a smaller portion of the cost, with a smaller principal loan value. You may also want to explore adjustable rate mortgages but this is a risky venture, and has led to many people being forced to default on their loan payments and lose everything that they have paid in before the adjustable rate was enforced.
If you have a fixed rate installment loan, you will have to pay the fixed interest regardless of how quickly or slowly the loan is paid off. Again, that is why they are called fix rate loans. This is not the case when you are paying off accrued or amortized installment loans, but you have to know a little bit before you get your loan.
It is imperative that when you are considering looking for a mortgage, or even when you are buying a car, that you examine the terms of the loan closely. It is important that you can pay the loan back ahead of schedule without incurring any penalties. It is also important that you know how to make those additional loan payments so that they actually help you to greatly reduce your interest rates and the amount of interest being paid.
If you get a 30 year mortgage and made two payments every month instead of just the one, how long would it take you to pay off the loan? The easy answer is fifteen years, but only if you were foolish in the way, you make the payments. If you are smart, even that extra hundred dollars you managed to save by living within your new monthly budget can save you substantially more than it would if you just put it in the bank.
The key is making all those additional payments to the principal value of the loan. You have to make sure you are allowed to do this before you sign the loan, but it will save you a lot of money over the course of the loan. Mortgages are amortized with interest being accrued on the principal amount still due.
In the early phases of the loan, if you look at your loan payment schedule, you will see that the vast amount of your monthly mortgage payment goes to paying off interest, with only a small amount of your installment loan payment being applied to the principal.
If you not only made a second loan payment, but applied it to the principal value of the loan, it would reduce the principal amount, meaning that the interest being accrued would be reduced at the same time. If you have ensured that all this is possible, and by some chance you can double up on your payments, paying the additional amount off on the principal value, you could pay off a thirty year mortgage in less than ten years.
The actual amount of money you can save by paying off the principal loan value early will depend on what kind of loan you have, the terms and conditions of the loan, and your ability to continue making payments as planned. While this may not be a lot of help for someone just needing a payday loan to survive, it can help in the larger scheme of life, and the role your credit and financial health will be determined.