If you pay later than your due date, even if it`s ONE DAY, more interest has accrued, so more of your payment will go to interest. A consistent payment too late may result in additional payments being added at the end of your contract or, in some cases, a large lump sum. Ouch! At the beginning of your contract, the amount of interest you pay is higher because the principal balance is large. When you make payments, the principal balance decreases with interest. Simple interest financing (RIS) is a common method of calculating the cost of financing based on the agreed terms (amount of financing, number of payments, interest rate/APR, maturity date, etc.) of a financing contract. Payments are divided between accrued financing costs (interest) and principal. The financing costs indicated in the contract assume that a customer will pay the specified payment amount on the specified due date for the entire term of the contract. Assuming an outstanding principal balance of $10,000.00, an APR of 12% and a planned monthly payment of $300.00, the daily financing costs are calculated as follows: At Chrysler Capital, we like to make your life easier, and if you buy a vehicle, it comes with a simple interest contract. It makes sense to keep track of your car contract for a number of reasons. If you are in default, not only will you pay more interest, but there may also be late fees. A consistent payment too late may result in additional payments being added at the end of your contract or a large final payment. Learn how simple interest, the most common method of calculating auto finance fees, is calculated and be prepared when you visit the dealership.

Principal is the amount of money you borrow to buy the vehicle, while interest is the fee paid to borrow that money. The principal amount refers to the actual amount you financed when you purchased your vehicle. Interest covers the cost of paying for the vehicle over time, rather than paying the full amount in advance. Understanding how simple interest rates work can help you stay on track with your payments and even save, so watch this short video and read on to find out how. And as a large auto lender with millions of customers, Santander Consumer USA knows that many borrowers are confused about how simple interest rate contracts work. Here are two ways to save with a simple interest contract. At first, a large portion of your monthly payment goes into interest. This is because your main balance is large. But if you continue to make payments, your principal will decrease and the amount of interest will decrease with it.

So, as you approach the end of your contract, more of your payment will go to principal and less to interest. Just because car financing includes contracts with simple interest rates doesn`t mean everyone understands them. Finally, since the ISP takes into account the number of days between payments received; The payment of sooner or later affects the total amount of accumulated financing costs. With a value of $3,287 per day and a payment of $300.00: To help you understand how simple interest contracts work, we`ve produced a short video that should help. Part of this week`s video series “How Simple Interest Works” appears in the Learning Center on the Santander Consumer USA website. Simple interest is calculated daily, and if you pay on your due date, you pay exactly the amount of interest agreed in your contract. If you often pay late and/or below the minimum amount due, this will result in MORE accumulated financing costs. In addition, the addition of time between payments (. B, renewals, due dates and transfers) means that you will pay MORE financing costs and that the repayment of your contract may take longer.

Two important parts of a simple interest contract are principal and interest. The result is the amount of funding costs incurred over a certain period of time or a certain number of days. Constant payment of premature fees and/or higher than the minimum amount due during the term of the contract results in FEWER accumulated financing costs. This can save money and result in early repayment of a contract. The question “What is a simple contract of interest?” is not unusual. Read our article “Setting a Monthly Budget” to get started and explore other resources on the Chrysler Capital Blog and Learning Center to expand your financial knowledge. Step 3: Divide the result by 365 calendar days. This is called a daily allowance or daily interest. This amount changes when the capital balance decreases. Keep in mind that you should always have enough cash in your connected bank account for payments to be processed. .