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Guaranteed Installment Loans For Bad Credit Understand The Costs Of The Loan

guaranteed acceptance loans online

When you are buying real estate, you are also buying money to finance the purchase. It is like you are shopping in the supermarket, you always need to compare costs and benefits of the products you are buying.

In principle, you need to find a loan that costs you the least amount of money over the entire loan life. It is fairly easy to figure out the monthly payment, as it is always stated clearly in the loan contract, however, it will be a little tricky when it comes to the costs of loan over entire loan life. Apart from the interest, the costs on the loan will also consist of the origination fees, upfront points, closing costs, and so on.

Simple Interest

Almost everybody knows how to calculate simple interest, because it is simple and straightforward. The annual interest you need to pay is the principal times the interest rate. As you usually pay the mortgage payments monthly, the monthly payments then will be the annual payments dividing 12. Simple interest payment usually happens in the interest-only loan. In the interest-only loan, the borrower only needs to pay interest on the installment loans guaranteed every month, and pay the principal in the end the loan life. Because of that, interest-only guaranteed acceptance loans online is very risky to the investor. To reduce the risks on the loan, most of the loans now use more complicated methods to calculate interest.

Amortization

In an amortization loan, you need to make periodic payments including interest and principal. The payments usually have higher portions of early payments toward interest and significantly higher portions of later payments to pay down the principal. Many websites nowadays provide the calculation of the amortization loans. You can simply go to a related website, insert your loan amount, term, and interest rate, you will get the result of the monthly amortization payments on the loan. If you want o have the whole picture of the amortization schedule, you can use the Microsoft Excel template on your computer to calculate the monthly payments. With the Excel spreadsheet, you can see the interest payments drop gradually as the principal amortized and the loan life approaches to the end.

Upfront points, origination fees and other fees

On top of the interest rate, there are also other costs such as upfront points, origination fees, closing costs that will increase the loan costs. Plenty of the lenders charge interest upfront in the form of points. One point is equivalent to 1 percent of the total loan amount. Usually the upfront point is 1-3 points of the loan amount. It does not sound like a lot of money, but if you plan to sell your property in a couple of years, it will really make a difference. Origination fee is what the lender or broker charges you as a service fee for processing your loan. They are usually calculated as a percentage of the total loan amount and charged as a cost to the borrower. When origination fees, upfront points sometimes are unavoidable, you need to watch out for junk fees which the bankers and the brokers attempt to charge you. They are varied from firms to firms and usually negotiable. When you see some unreasonable fees on your loan statements, just ask and try to avoid paying what you are not supposed to pay.

The bottom line

Many newspapers publish the interest rates and points bank, brokers, and other lending companies charge in the financial section. Although this financial information gives you a general view of the loan costs in the current market, it actually does not help so much. The reason is that these figures don't include the other costs associated with the loan, such as the loan origination fee, processing fees, junk fees. When you decide to finance your purchase with loan, you need to take these fees into account and understand the costs of the 2500 dollar loan.