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 ...
  • 3,146
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 ...
  • 3,160
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 ...
  • 117k
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.
  • 3,632
87 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 ...
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 $...
  • 49k
63 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 ...
61 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 ...
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. ...
  • 4,362
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 ...
  • 37.1k
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 ...
  • 20.8k
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 ...
52 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 ...
  • 32k
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 ...
  • 23.8k
36 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
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 ...
  • 32k
32 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 ...
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 ...
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 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 ...
  • 49k
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

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 ...
  • 49k
27 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 ...
  • 48.6k
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 ...
  • 6,768
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 ...
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 ...
  • 46.2k
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 ...
25 votes

How does a bank make money on an interest free secured loan?

Most 0% interest loans have quite high interest rates that are deferred. If you are late on a payment you are hit with all the deferred interest. They're banking on a percentage of customers missing a ...
  • 65.1k
24 votes

How do I calculate monthly compound interest in Google Sheets?

You just use the compound interest formula: Principle * (1 + Rate / Time) ^ Time For Cell C2 you want this formula: =B2*(((1+(D$1/360))^(C$1-$A2))-1) Column A is deposit date Column B is deposit ...
  • 48.6k

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