If you're talking about a loan that is scheduled to be paid out over a specific period of time, the structure changes. I'll try to simplify my credit card explanation, though (I noticed my numbers were off, as well).
Let's say the credit card had a 12% APR; this would come out to approximately 1% per month. When you make a purchase with the card, interest will start to accumulate in the following months. So for a $1000 purchase, the 1% interest will add $10 to your balance after the first interest-bearing month ($1000 x 0.01 = $10). Your balance is now $1010. You will now be required to make at least the minimum payment for that month, which we'll say is 3% of the balance. This means that your minimum payment is $30.30 ($1010 x 0.03 = $30.30). If you make just the minimum payment, this will leave your current balance at $979.70. The next month, interest will be calculated again at approximately 1%, adding another $9.80 to your balance ($979.70 x 0.01 = ~$9.80), now making it $989.50. Your minimum payment is once again due, which will now be $29.69 ($989.50 x 0.03 = ~$29.69). So far in these two months, you have paid $19.80 in interest on your initial purchase.
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Hates Nomura. Tagged: GooseGaws - <--- Has better taste in games than you. |
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