The Benefit of Paying Your Simple Interest Loan Off Early, Car dealership in Richmond

Have a banker or a financially savvy person explain to you the benefits of paying off a loan early and you are guaranteed to get glazed over eyes and more questions than when you started the conversation. Finance terms like amortization, curtailment, and principal start spinning around and leaving your mind in more directions than a cartoon sign with ten direction arrows. When purchasing used cars in Richmond, VA, always consider ease of financing. The financing at Airport Auto Sales with Buy Here Pay Here is; luckily, a little easier to understand. The bottom line and most important benefit of all is that you save money.

Most loans that you will encounter for used cars in Richmond, VA are simple interest loans. To break the loan down into the most basic terms; the simple interest loan is either amortized or non-amortized. Most people are familiar with the former which requires the interest to be paid front heavy in the loan before you can even touch your principal (the amount you originally financed). The non-amortized loan at Airport Auto Sales Buy Here Pay Here acquires interest every day of the loan on your used car. Either loan can provide benefits by being paid off early.

The amortized loan is typically best paid off early by throwing more at your monthly payments in the beginning of the loan. If the monthly payment is $200 and $150 of that will go towards your interest, the remaining $50 will go towards the principal. Every additional dollar thrown at the principal will lower the amount of interest owed in the next monthly payment. By making large payments early in the loan, the amount of interest owed overall on the loan decreases. However, the owner of the used car still has to spend the beginning of their loan paying mostly interest.

The simple non-amortized loan at Airport Auto Sales Buy Here Pay Here is even easier to pay off early. Although the non-amortized loan acquires interest daily, the owner of the used car can beat the interest by paying early. If the loan is financed for a year and you decide to pay it off in four months instead of twelve, you end up only paying four month’s of interest. The remaining amount owed will just consist of the principal. Most finance companies and banks do not want their loan applicants to know this information because the interest is how they make their profit. By paying the loan off early, their overall profit off the loan decreases. Therefore, it is a good idea to always ask when taking out a loan, what will happen if you want to pay the loan off early. Many banks have prepayment penalties to ensure that either the loan takes the full term of the financing to be paid or that the bank receives their profit. Here at Airport Auto Sales Buy Here Pay Here want our customers purchasing used cars in Richmond, Va and its surrounding area to be able to save as much as possible. Therefore, Airport Auto Sales does not charge a pre-payment penalty for paying off early. In fact, we encourage our Buy Here Pay Here customer to pay off early because we know that 75% of those customers, will return for a second purchase!