How is interest applied on an RV loan?
When you take out a 10 year RV loan, is the interest spread out equally across all the payments or is it mostly paid up front like a home mortgage?
Forum Discussion
Yes simple interest applied to a declining principal balance is an amortizing loan.
Although generally mortgage interest will use 1/12 annual interest rate to calculate the monthly interest and give a 10 day grace period. This keeps the amortization schedule fixed.
Auto and RV loans often will count days between payments on a 365 day basis to calculate interest. So if you are perpetually 5 or 8 days late you will pay a bit more interest and have a slightly larger payment at the end. Some are like a mortgage.
Of course any payment beyond the grace period will really throw things off. Most consumer loans have no prepayment penalty so go ahead and pay some extra when times are good. Read your statement each month to fully understand your contract.
Although generally mortgage interest will use 1/12 annual interest rate to calculate the monthly interest and give a 10 day grace period. This keeps the amortization schedule fixed.
Auto and RV loans often will count days between payments on a 365 day basis to calculate interest. So if you are perpetually 5 or 8 days late you will pay a bit more interest and have a slightly larger payment at the end. Some are like a mortgage.
Of course any payment beyond the grace period will really throw things off. Most consumer loans have no prepayment penalty so go ahead and pay some extra when times are good. Read your statement each month to fully understand your contract.
