108
votes
What to do with $1,000,000.00 for 3&1/2 months?
If you need that money for a payment 3 1/2 months away, then you need to be extremely risk averse. Maybe even to the point that you may want to spread that $1mil to several banks to stay under the ...
- 3,176
104
votes
Accepted
Why would anyone buy U.S. Treasury Bills?
No, what it says is “In half a year, we’ll give whoever holds this bond $10,000 for which you pay us $9,750 now”.
This is equivalent to an annual interest rate of about 5% (the example is showing a ...
- 3,190
101
votes
Accepted
How does a bank make money on an interest free secured loan?
A "true" 0% loan is a losing proposition for the bank, that's true. However when you look at actual "0%" loans they usually have some catches:
The interest actually accrues at some rate but is not ...
- 130k
88
votes
Accepted
Can I take out a loan and pay it back immediately to avoid interest?
It will depend on the terms and conditions of the loan you take. Some loans have penalties on early repayment while others do not.
- 3,642
86
votes
Accepted
Multiple loans, multiple payers - how to snowball fairly
First off, your commitment to paying down debt and apparent strong relationship with your brother is admirable. However, I think you are overcomplicating your situation and potentially endangering ...
- 41.7k
84
votes
Prepaying a loan: Shouldn't the interest be recalculated like a shorter loan?
When you pay off a loan early, you pay the remaining principal, and you save all of the remaining interest. So you do save on interest, but it's the interest you would have paid in the future, not the ...
- 1,193
70
votes
Interest: what is the most strategic time to make a purchase: just before or just after the statement comes out?
In order to pay a lower interest rate on my credit card balance...
pay the balance in full by the due date. That way, you pay $0 interest. No need for scheming and strategizing: if the bill says $...
- 50.6k
69
votes
Accepted
What would be a recommended interest rate for an unsecured loan to individuals with mediocre credit rating and income close to expenses?
You're not a bank, so don't try to think like one. Banks base their interest rate off of the average risk of default for similar borrowers based on carrying multiple loans to spread the risk. In your ...
- 130k
65
votes
Why don't bond makers just get loans?
They are not necessarily a scam, or even likely to be. There is a reason they didn't just borrow the money at 5% though and this is virtually certain to be because they are higher risk.
There was a ...
- 1,059
62
votes
Accepted
Can I take out a loan and invest it at higher interest?
You must consider the different levels of risk associated with each loan.
When the bank loans you money, it does so based on a high degree of information about your financial situation (through your ...
- 41.7k
59
votes
How can I buy things with monthly payments in the US?
Trying to frame my advice in a way that technically answers the question:
Don't buy it right away. Pay $100/month to a savings account, and after ten months, buy the item with your accumulated $1000.
...
- 4,466
58
votes
Why does my car loan interest go up despite making payments on-time?
Interest is calculated daily.
Doing the math:
Between 6-17 and 7-25 are 38 days, 200.29 / 38 = 5.27 interest per day.
Between 7-25 and 8-17 are 23 days. 120.02 / 23 = 5.22 interest per day.
The ...
- 37.6k
55
votes
Do I pay a zero % loan before another to clear both loans faster?
By paying the $11,000 into the 2.54% loan you will save $23.30 in interest every month. By paying the $11,000 into the 3.625% loan you will save $33.20 in interest every month.
If your objective is ...
- 21k
54
votes
Why don't bond makers just get loans?
It doesn't necessarily have to be a scam. The most likely scenario is that the issuer of the 12% bonds is higher risk, so you have to take that into consideration in your calculations.
If you borrow ...
- 3,100
53
votes
Accepted
Is asking to pay off principal first a placebo?
Many lenders in the US do permit additional payments to be made against the principal. Those will reduce how much you actually owe, which reduces the total interest you will owe over the duration of ...
- 42.9k
44
votes
Should I charge my children interest when they borrow money?
I think there's value in charging family members/friends interest if it will make them take the loan seriously. The problem is that if you're thinking about charging interest because the person seems ...
- 24k
35
votes
Should I pay off my car loan within the year?
Personally, I don't think that the interest from the car loan is worth the credit history you're building through it. There are other ways to build credit that don't require you to pay interest, like ...
- 6,849
33
votes
Is asking to pay off principal first a placebo?
It is extra payments that you apply to the principal.
Here is an example. Let's say that you have a mortgage with a monthly payment of $1000 per month (principal and interest), which you pay on the ...
- 115k
32
votes
Do I pay a zero % loan before another to clear both loans faster?
See many past answers: you will usually save the most money by paying off the highest-intetest-rate loan first. (Remember to allow for tax effects, if any, when comparing real interest rates.)
Some ...
- 42.9k
31
votes
Accepted
Paying Off Student Loans Early
As you noticed, there are diminishing returns on the interest savings as you get closer to paying off the loan. Certainly, the quicker you pay off the loan, the more interest you save. However, the ...
- 115k
31
votes
Should I charge my children interest when they borrow money?
Tell them you will not loan them any more money until their existing debts are paid off. This is closer to how the real world works and it won't come across as vengeful or like your changing your ...
- 591
31
votes
How does a bank lend your money while you have constant access to it?
Fractional Reserve Banking, that's how, under the assumption that only a small percentage of customers will take all -- or even most -- of their money out at any one time.
The country's central bank ...
- 50.6k
31
votes
Accepted
Is there any advantage to a longer term CD that has a lower interest rate than a shorter term CD?
Taking a longer-term CD with a lower interest rate could make sense if you expect CD interest rates to drop in the near future. Suppose you could get a 6-month CD with a 5.1% interest rate, or a 12-...
- 4,596
30
votes
How can I buy things with monthly payments in the US?
I am a new international student in the US
Aren't you here on an F-2 visa?
that it's price is $1000, and I want to do the payment like $100 per month for 10 months (with no extra interest), how can ...
- 50.6k
29
votes
Why don't bond makers just get loans?
Plenty of other people have mentioned that the bond issuer might be a bigger risk. That's a possibility, but there are other factors -- probably more important factors -- in play as well.
First, ...
- 391
28
votes
Can I take out a loan and invest it at higher interest?
If you think you can manage the risk and the spread is ultimately worth it to you, there's nothing stopping you.
I know in the U.S., in CA specifically, you need to have $85,000 annual income or net ...
- 48.9k
27
votes
How can bonds reach 0 and negative interest rates? why would someone buy them?
And how can bonds reach 0 and negative interest rates?
0% interest is simple. You just skip the coupon payments and get your money back when the bond matures. Negative interest rate bonds are issued ...
- 7,422
26
votes
How to separate interest paid on a credit card between personal and business expenses?
There is no rule of thumb that can be used to separate the amount paid in interest.
The reason why so much interest was paid was because when you don't pay it off each month the new charges ...
- 136k
26
votes
Interest: what is the most strategic time to make a purchase: just before or just after the statement comes out?
tl;dr: Prolong every new charge as long as possible until you are back to paying in full every month.
In the best case scenario, if you are paying your balance due in full every month, it doesn't ...
- 47.1k
25
votes
Accepted
Paying off a loan with a loan to get a better interest rate
I don't know what rates are available to you now, but yes, if you can refinance your car at a better rate with no hidden fees, you might save some money in interest.
However, there are a couple of ...
- 115k
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