I need help understanding "interest rates"!

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It's sort of a n00b question.

I clearly don't know anything about interest and I just have a question to ask you guys.

What is interest rates and what do they mean?

Can you give me an example too!! like in a car buying situation and applying for a credit card or a store credit card situation!?

I'm fairly confused and don't know much about it. I probably was taught it in Math courses in my middle school or high school career but I probably ignored it. But I need help understanding it.

Sorry to those that make think I'm stupid but I do need to know what it means.

Thanks...

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Interest rate is the amount in exceed you have to pay when you pay something not in cash, or when you take a loan. So say you take a loan of \$1000 with an interest rate of 10% for 10 months, you have to give back those \$1000 plus the interest, in this case, the 10% of \$1000, \$100. As you took it for 10 months, you have to pay \$110 each month. It's the same with a credit card

This example was just illustrative, I know there are no 10-month loans and no 10% interest rate in loans

Just google "apr definition". That should explain it. I'm drunk. Interest is what they charge on money they give you. The faster you pay down the primary and the lower the interest, the bEtter you are.

That's about all I'm capable of e plaining right now.

Or check out my new webcomic: http://selfcentent.com/

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 11/20/09 04:25 makingmusic476 Warning Other (Your avatar is borderline NSFW. Please keep it for as long as possible.)
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 zexen_lowe said:Interest rate is the amount in exceed you have to pay when you pay something not in cash, or when you take a loan. So say you take a loan of \$1000 with an interest rate of 10% for 10 months, you have to give back those \$1000 plus the interest, in this case, the 10% of \$1000, \$100. As you took it for 10 months, you have to pay \$110 each month. It's the same with a credit card This example was just illustrative, I know there are no 10-month loans and no 10% interest rate in loans

So your telling me that if I took out a loan for \$1000 and the interest rate is 10% for 10 months. I have to give them back the \$100 plus the interest?

So my payments would be say for example I'm giving them back \$100, I would also have to pay \$110 which makes it \$210 I'm actually paying them a month?

ecurbj said:
 zexen_lowe said:Interest rate is the amount in exceed you have to pay when you pay something not in cash, or when you take a loan. So say you take a loan of \$1000 with an interest rate of 10% for 10 months, you have to give back those \$1000 plus the interest, in this case, the 10% of \$1000, \$100. As you took it for 10 months, you have to pay \$110 each month. It's the same with a credit card This example was just illustrative, I know there are no 10-month loans and no 10% interest rate in loans

So your telling me that if I took out a loan for \$1000 and the interest rate is 10% for 10 months. I have to give them back the \$100 plus the interest?

So my payments would be say for example I'm giving them back \$100, I would also have to pay \$110 which makes it \$210 I'm actually paying them a month?

This example is not compound interest, but I will keep with the example he presented.

What he is saying, is if you took out \$1000 loan from your parents, and they charged you 10%, you would owe them a total of \$1100. \$1100 divided by 10 months, means you will have to pay them \$110 a month.

Sadly, real interest is a lot scarier, so I would suggest living your life paying as little of it as posable. (don't live off of credit)

ecurbj said:
 zexen_lowe said:Interest rate is the amount in exceed you have to pay when you pay something not in cash, or when you take a loan. So say you take a loan of \$1000 with an interest rate of 10% for 10 months, you have to give back those \$1000 plus the interest, in this case, the 10% of \$1000, \$100. As you took it for 10 months, you have to pay \$110 each month. It's the same with a credit card This example was just illustrative, I know there are no 10-month loans and no 10% interest rate in loans

So your telling me that if I took out a loan for \$1000 and the interest rate is 10% for 10 months. I have to give them back the \$100 plus the interest?

So my payments would be say for example I'm giving them back \$100, I would also have to pay \$110 which makes it \$210 I'm actually paying them a month?

TheRealMafoo said:

This example is not compound interest, but I will keep with the example he presented.

What he is saying, is if you took out \$1000 loan from your parents, and they charged you 10%, you would owe them a total of \$1100. \$1100 divided by 10 months, means you will have to pay them \$110 a month.

Sadly, real interest is a lot scarier, so I would suggest living your life paying as little of it as posable. (don't live off of credit)

@TheRealMafoo

I'm understanding you clearly now..And I will go step by step on what you said.

1) My parents gave me a loan of \$1000, and they charged me 10% interest

2) I now owe them \$1100 because of the added 10% interest (\$1000+.10=\$1100)

3) My term is then 10 months. I will then divide how much I owe them by the amount of months (\$1100/10) and get \$110 I owe them per month.

Is that right?

Say you had a credit card with a 10% APR (annual percentage rate). You make a purchase for \$1000. Most cards will have a minimum payment of something like 3% of your total balance or \$10, whichever is higher. When they calculate interest on that \$1000 the next month, the value is approximately 1/12 of the APR (in this case, 0.083333333...%). So your total balance will be \$1083.33. If you only make the minimum payment of 3% (\$32.50), your balance will now be \$1050.83. So when the next month rolls around and interest is calculated again, your new balance will be \$1138.40. Make sense?

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Interest rate can be good too.

if you open a interest baring account such as a Money market savings or CD, you actually earn interest on a monthly basis.

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 11/20/09 04:25 makingmusic476 Warning Other (Your avatar is borderline NSFW. Please keep it for as long as possible.)