Interest Rate Question

Generally speaking, the interest rate doesn't change. (Well, it's not supposed to unless you agreed up front; some lenders may be devious and change it without telling you.)

Here is the math behind loans, with some example data. Maybe this will help.

r = the quoted interest rate; say 9% (= 0.009)

i is the periodic interest rate = r/12; it's the % charged each month on the balance.

r2 is the 'APR' = (1+i)¹² - 1 ; in this case r2 = 0.09381 = 9.381%

N is the loan term; say 48 months.

Price = the sticker price of the item; say $2000.

Down = the down payment you make; say $50

Tax = the sales tax; say 7% = 0.07

Cost = Price * (1 + Tax) = $2140

Loan = Cost - Down; Loan = $2090 the amount you borrow for the item

PMT = your monthly payment calculated by:

PMT = Loan*(i/[1 - (1+i)^-N])

So here, PMT = $52.01 per month

Total = PMT * N + Down ; the total amount you will eventually have paid for the item.

Here, Total = $2,546.47 for the "$2,000" item

Small correction:

In the line describing the interest rate it should say:

r = the quoted interest rate; say 9% (= 0.09)