Say there’s a loan for $10,000. The interest rate is 11%. Monthly payment is $300.
How can you keep interest at bay, and not pay thousands in interest by the end of it all?
Is there a formula to figure out how much *extra* to pay per month, in order to… cancel out? the interest?
Is this even possible? Is this even how interest works?
Honestly, I don’t get the concept at all. Explain it to me like I’m five.
In: Economics
The only way to functionally cancel out interest is to pay off the entirety of the loan right away, in which case, why are you even taking out a loan in the first place?
How much of your payment goes to interest depends on how your interest is compounded and the terms of your loan. I would recommend referring to the TILA (Truth In Lending Act) form that typically accompanies these loans. It should lay out the general structure of your loan, including what would go to the interest.
Long story short, the greater the amount you pay each month, the more goes to the principle and the less you would have to pay in interest otherwise.
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