Simple vs. Compound Interest – Understanding the Difference

 
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When planning to borrow money, it’s important to understand the concept of interest. Basically, interest is the cost of borrowing money from a lender. Interest can be charged by a bank or credit union, or from LoanMart on their Car Title Loans Online. There are several different types of interest, and borrowers should understand the basic differences between simple and compound interest.

Simple Interest

Simple interest is paid only on the total amount of the loan’s original principal, or the money originally borrowed. Simple interest is calculated by taking the original cost of the loan and multiplying it by the interest rate and the length of the loan, typically expressed in months.

Compound Interest

Compound interest is slightly more complicated. This type of interest is the amount paid on the original principal of the loan, and on the interest charged previously. At the end of each year (if the interest is compounded yearly) the interest charged is then added to the original amount of the loan and recalculated.

Interest on Car Title Loans

The interest paid on Car Title Loans from LoanMart is amortized into the loan over a period of 12-36 months. This means that in the beginning, payments will mostly go toward paying down the interest, and will later be applied to the principal once the interest requirements have been met.

Amortization also means that there are no balloon payments or unexpected fees with our Auto Title Loans. Payments are set over a certain number of months, and a borrower will know what is expected to pay each month. Amortized loans make it easier to pay back a loan without coming up with a lump sum of cash in the future.

Consider the Benefits

If concerned about the interest on an Auto Title Loan, speak to a friendly representative at LoanMart.

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DISCLOSURES

LoanMart may act as the broker for the loan and may not be the direct lender. Loan proceeds are intended primarily for personal, family and household purposes. LoanMart does not offer or service student loans. California loans are made or arranged pursuant to a California Financing Law License. See State Disclosures for additional disclosures.

1Credit approval is subject to LoanMart’s credit criteria standards. Actual loan amount, term, and Annual Percentage Rate of the loan that a consumer qualifies for may vary by applicant. Minimum loan amounts vary by state. Consumers need to demonstrate ability to repay the loan.

2Based on consumers who received a loan from February 2002 to October 2018.

3Application processes could take five (5) minutes to complete. Upon completion, a conditional approval may be given pending review of documentation. Funding time is based on the time from final approval following receipt and review of all required documents and signing, prior to 5PM PST on a business day.

4To exercise the right to rescind, the consumer(s) must notify LoanMart in writing by midnight on the sixth calendar day from obtaining the loan. Within one business day from notice of rescission, the consumer(s) must return any monies received and fees paid on behalf of the consumer(s) by certified funds.

5LoanMart recommends and encourages customers to pay early and often and more in order to avoid additional finance charges.

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