Personal loan APR issue?

Can anybody tell me how the APR is applied on loans, I know it stands for Annual Percentage Rate.

I'm fixing to get a $5000 loan with an APR of 14.99% with a 24 month term paying $243 a month.

My main concern is that if on my first payment I do $600, my balance will be $4400, Will the bank be applying the 14.99% to that amount making it come up to $5,059.56 and then the next month I pay another $600 - $5,059.56= $4,459.56. So now I've paid the annual APR so on my third bill will be for $4,459.56 I'll be making a payment for the same amount $600 to have a balance of : $4,459.56 - $600 = $3,859.56.

HAVE I UNDERSTOOD IT WELL ?

AM I STILL WRONG?

Please if any of you have better knowledge about how this is applied yearly, monthly, etc. Do not hesitate to give me some briefing.

Thank you very much

Joshua.

Personal loan APR issue?

Whether the interest rate is applied on a daily or monthly basis depends on the terms of your loan.

If it is applied monthly, for your first payment (assuming that it is 1 month after you got the money), you would take 14.99%/12 = 1.24917%, multiply that times $5000 = $62.46. So for your first payment of $600, $62.46 would be applied to interest and the remaining $537.64 would pay off principal. So you would have a new balance of $4462.46

Then, for your next payment, the interest calculated the same way, would be $55.74, and your new balance would be $3918.20. After 3 payments, your balance would be $3367.14. You would have the loan paid off in 9 months.

Even if the loan is compounded on a daily basis, using the monthly basis should get you pretty close, and it's a lot less work. To calculate using a daily basis, you need to divide the 14.99% by 365, and build a spreadsheet that adds the interest to the balance each day, figure out the exact day your payment will be credited and then use the spreadsheet to determine how much of the payment is principal vs. interest.

If you use the monthly method to determine your approximate interest, and then update your exact balance every month, it will be a lot less work, and you should still be within a few dollars one way or the other.

Personal loan APR issue?

You take the balance and multiply it by .0125 to see what the interest is for that month. (1.25 is 14.99/12*100 )

For Instance:

$5000 - 600 = 4400

$4400*.0125 = $55

$4400 +$55 = $4455

Personal loan APR issue?

the hiddne idea here is the annual yield which takes into account compound interest. The yield is always a bit more than the actual rate...good news if you are saving and bad news if you are paying off