What is Simple Interest Anyway?

It’s one of those rare quiet days today at the office. Seems like the perfect time to talk about car loans and simple interest. Armed with this knowledge, you can be a far more informed customer when you speak to your lender.

You probably already know that when you borrow money from a bank or finance company, you need to compensate them for the privilege. The bank is viewing an investment in financing or refinancing your car strictly through a business lens: they lend you the money for your car purchase, and you repay the loan plus interest in monthly installments over a set time frame. For your lender, a loan to you is an opportunity to earn income in the form of interest payments. For you, the benefit lies in owning a car you can rely on for both transportation and enjoyment over the next several years.

In making a loan to you, how does the lender decide what to charge you for the use of its funds? Most auto loans use a simple interest formula to calculate your payment schedule. Let’s say you borrow $20,000 to refinance your car over a 48-month period at five percent interest. You can use an online “amortization calculator,” such as the one at www.amortization-calc.com, to get an idea of what your monthly payments would be—in this case, $460.59.

The Process of Amortization

Here’s where the concept of amortization factors in. When you make your first month’s payment of $460.59, you are paying five percent on the entire $20,000 you borrowed. As you make payments, however, a portion will be applied to interest and a portion to pay down principal. This ratio of interest/principal will vary as your loan is gradually paid off over the 48-month period. This is because as you make payments, your principal will decline by a bit each month so you will owe less in interest on the remaining amount.

Using the example above, www.amortization-calc.com shows the first and last two months of payments (see chart below). Your first month’s payment of $460.59 will include a higher component of interest than any other month. While the first month’s payment shows $83 applied to interest and $377 applied to principal, by the final payment of $460.59 four years later, only $2.00 is applied to interest and $459 is applied to principal. This is called an amortizing loan, based on simple interest.

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Though the concept of amortization may sound complicated, don’t be concerned. You still are paying the same $460.59 each month. Your lender will do the allocation between interest and principal for you and apply your payments properly each account. And once your loan is paid off, the car is yours, free and clear!

Important Disclosures and Requirements

Customer Consent to Receive Account Information Electronically

The Electronic Signatures in Global and National Commerce Act requires your consent to receive certain disclosures electronically. Please read this section carefully and retain a copy of this document for your records.

ELECTRONIC RECORDS

Some communications and disclosures with and by RefiJet.com on its behalf and on behalf of participating banks, finance companies, and credit unions (hereinafter called “Lenders”) are conducted electronically. However, if you wish to obtain a paper copy of any disclosure to your offer and/or loan/finance offer request, you may write to Yield Solutions Group, LLC (dba RefiJet.com) at 7555 E. Hampden Ave., Ste. 500, Denver, CO 80231. We will not charge you a fee for a paper copy of the Disclosures you request. RefiJet does not provide any Lenders’ disclosures.

RefiJet.com reserves the right, in its sole discretion, to stop providing Disclosures electronically. RefiJet.com will provide you with notice of any such termination as required by applicable law. If RefiJet.com chooses to stop providing Disclosures electronically, RefiJet.com will send any future Disclosures to you in paper form.

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The applicant and any co‐applicant (collectively, “you”) must consent to receive Disclosures electronically in order to complete the loan/finance offer request process with RefiJet.com on behalf of its participating Lenders (as defined above). Your consent will apply to Disclosures you receive from RefiJet.com, its successors and assignees, and any Lenders. You may withdraw your consent for receiving electronic Disclosures by notifying RefiJet.com at Info@RefiJet.com. Since RefiJet.com is structured to provide some loan/finance offer request related information electronically, not consenting, or withdrawing your consent to receive electronic Disclosures may terminate your loan/finance offer request process. You may withdraw your consent to do business electronically with our participating Lenders at no cost to you. You may do so by contacting the Lender at the mailing address, e‐mail address or telephone number they provide to you separately for such purpose.

CONSENT TO RECEIVE DISCLOSURES ELECTRONICALLY

In order to use this service, you must consent to receive disclosures including but not limited to the Terms of Service and Privacy Notice electronically and you agree that these electronic disclosures will be sufficient as a “writing” under applicable law.

If you have access to this website, you have suitable hardware/software to access and retain electronic documents.

This consent is valid until revoked by either party.

Please notify us at 1.800.260.5355 if your contact information changes at any point in the refinance process.

MONTHLY PAYMENT REDUCTION CLAIM**

This average monthly auto loan payment savings reflects loans where the borrower chose to lower their monthly payment. Not every auto refinance is intended to lower monthly payment. These savings are not guaranteed. Individual savings and rates may differ.

2018‐10‐08 02:30PM MST