If I'm borrowing say, $5,000 and plan to make $200 payments each month, which of these loans would end up being the better option? I believe that the interest on either will accrue daily rather than monthly.
- 4-year term at 6.50% with minimum payments at $118.57
- 5-year term at 7.25% with minimum payments at $99.60
I'm wondering how that interest rate plays into an early payoff plan. Unless I'm looking at this wrong, it seems that since more of the payment will go to paying down the principle on the 5-year loan, it may be the better option even though that interest rate is higher.