this post was submitted on 26 Oct 2023
1685 points (97.7% liked)
Technology
59149 readers
2298 users here now
This is a most excellent place for technology news and articles.
Our Rules
- Follow the lemmy.world rules.
- Only tech related content.
- Be excellent to each another!
- Mod approved content bots can post up to 10 articles per day.
- Threads asking for personal tech support may be deleted.
- Politics threads may be removed.
- No memes allowed as posts, OK to post as comments.
- Only approved bots from the list below, to ask if your bot can be added please contact us.
- Check for duplicates before posting, duplicates may be removed
Approved Bots
founded 1 year ago
MODERATORS
you are viewing a single comment's thread
view the rest of the comments
view the rest of the comments
In this case, I had a deal that had no penalties for early payoff, so in my case, paying off my car in 1/8 the time saved me 7 years of interest with no serious downside. Unless you count credit scores being BS and paying off loans early technically not being ideal credit management.
Fair enough, but I wasn't actually talking about early payoff penalty. I was speaking to the payback schedule that the loan company has you reimburse them with.
You pay your loan back on a monthly basis. In the earlier years, each monthly payment goes (for example) 80% to interest owed, and 20% owed to principal. Usually around the last fiveish years mark, your payment is applied 10% interest, 90% principal. The bank/loan giver makes sure they get their profit from offering you the loan in the earlier years. In other words, each monthly payment by you is NOT going 50%/50% interest/principal.
Don't get me wrong though, its ALWAYS good to pay off your loan early, from a total $ amount paid when you are done point of view. But if you take ten years to pay off a fifteen year loan, you've paid off most of the interest owed already, where if you pay off a fifteen year loan in five years you've paid less interest owed, % wise.
(The time frames I mention above is estimates for sake of this discussion, YMMV for your actual load, but the principal of what's being said is valid.)