vania-janet/multiturn-rag-retrieval-data huggingface dataset:
The bank depends on the laws of large numbers.  They don't need to make money on every customer -- just on average. There are several ways that zero interest makes sense to them: You asked about banks, and I don't think you see this last scheme in use very much by a bank.  Here's why.   First, customers absolutely hate it - and when you drop the interest bomb, they will warn their friends away, blow you up on social media, call the TV news consumer protectors, and never, ever, ever do business with you again.  Which defeats your efforts in customer acquisition.  Second, it only works on that narrow range of people who default just a little bit, i.e. who have an auto-pay malfunction.  If someone really defaults, not only will they not pay the punishment interest, they won't pay the principal either!  This only makes sense for secured loans like furniture or cars, where you can repo that stuff - with unsecured loans, you don't really have any power to force them to pay, short of burning their credit.  You can sue them, but you can't get blood from a stone.
"No... that's just what I'm owed for letting them use my principal.  If I wanted to enjoy the opportunity cost of 0% interest for 13 plus years, I'd just keep the money in my ""savings"" account (where the 8th wonder of world, miracle of compound interest no longer exists).   The bigger question posited by my snark was if/when the bond market will stop trading them as legitimate paper."
There many car loans at zero percent interest.   Finance the car at zero percent, then take your money and invest it. If you want to be super safe buy a CD the same length as the car loan. 5 years you will get 2%.  If you still want safety and a better return take up a asset allocation strategy that moves your cash to risky assets when the market is performing well, then to cash, bonds, or cds when the market under-performs. Now you have your car with a zero percent loan and you are making the return on the money instead of the car company.
"Usually not the total interest, but all interest accrued and unpaid to date. This is called the ""Loan Payoff Amount"", and repays the bank their principal plus the ""true"" cost of capital on that principal since your last amortized payment (which is probably never, since you just signed the loan papers). There may also be a ""prepayment penalty"". This is something that should have been disclosed to you if it exists, but it's fairly rare in U.S. mortgages anymore.  The theory is, the bank got the money they paid you at the start of the loan by selling a bond package backed by your mortgage and others of similar credit history and/or about the same time (a ""mortgage-backed security""). By turning around and paying early, you meet your obligation, but the bank is now stuck with at least 10 years of quarterly coupon payments on that bond, which they were expecting to pay using your mortgage interest. For their trouble, you would pay an additional amount that either covers their ""call price"" on the portion of the bonds used for your principal, or simply buys them the time to re-issue a new mortgage using your repaid principal to back the bond again. In the modern housing market, such a prepayment penalty is very rare, because so many lenders are willing to give you a mortgage without one, and so many buyers balk at the thought of having to pay more if they pay early; the whole point is to pay less by paying early. Just something to look up in your mortgage documentation."
You can track the differences in the Excel sheet and play ""what-ifs"" very easily to see the ramifications of spending your $5,000 in various ways. Understand that although, for instance, 13.99% may be your base interest rate, if the account has become delinquent, or you made any cash advances or balance transfers, higher or lower interest rates may be charged on a portion of the balance or the entire balance, depending on what's going on with your account; a balance transfer may get 0% interest for a year, then 19.99% interest after that if not paid off. Cash advances are ALWAYS charged at exorbitantly high rates, up to 40% APR. Most credit card bills will include what may be called an ""effective APR"", which is a weighted average APR of all the various sub-balances of your account and the interest rates they currently have. Understand that your payment first pays off interest accrued during the past cycle, then pays down the principal on the highest-interest portion of the balance first, so if you have made a balance transfer to another card and are using that card for purchases, the only way to avoid interest on the transfer at the post-incentive rates is to pay off the ENTIRE balance in a year. The minimum payment on a credit card USED to be just the amount of accrued interest or sometimes even less; if you paid only the minimum payment, the balance would never decrease (and may increase). In the wake of the 2008 credit crisis, most banks now enforce a higher minimum payment such that you would pay off the balance in between 3 and 5 years by making only minimum payments. This isn't strictly required AFAIK, but because banks ARE required by the CARD Act to disclose the payoff period at the minimum payment (which would be ""never"" under most previous policies), the higher minimum payments give cardholders hope that as long as they make the minimum payments and don't charge any more to the card, they will get back to zero."
"You seem to think that you are mostly paying interest in the first year because of the length of the loan period. This is skipping a step.  You are mostly paying interest in the first year because your principle (the amount you owe) is highest in the first year.  You do pay down some principle in that first year; this reduces the principle in the second year, which in turn reduces the interest owed. Your payments stay the same; so the amount you pay to principle goes up in that second year. This continues year after year, and eventually you owe almost no interest, but are making the same payments, so almost all of your payment goes to principle. It is a bit like ""compounded interest"", but it is ""compounded principle reduction""; reducing your principle increases the rate you reduce it. As you didn't reduce your principle until the 16th year, this has zero impact on the interest you owed in the first 15 years. Now, for actual explicit numbers.  You owe 100,000$ at 3% interest.  You are paying your mortgage annually (keeps it simpler) and pay 5000$ per year. The first year you put 3000$ against interest and 2000$ against principle. By year 30, you put 145$ against interest and 4855$ against principle.  because your principle was tiny, your interest was tiny."
The difference is whether or not you have a contract that stipulates the payment plan, interest, and late payment penalties. If you have one then the IRS treats the transaction as a load/loan servicing. If not the IRS sees the money transfer as a gift.
Approximately Yes. However as you are paying more, the interest accrused would be less.
"I think it's worth pointing out explicitly that the biggest difference between a credit card (US/Canada) and a debit card (like your French carte de crédit) is that with a credit card, it's entirely possible to not pay the bill or to pay only the ""minimum payment"" when asked. This results in you owing significantly more money due to interest, which can snowball into higher and higher levels of debt, and end up getting rapidly out of control. This is the reason why you should ALWAYS pay off the ENTIRE balance every month, as attested to in the other answers; it's not uncommon to find people in the US with thousands of dollars of debt they can't pay off from misuse of credit cards."
"It may be the case that some of your debts have a flat regular fee in addition to the interest, which will go away when the debt is completely paid. For example, my mortgage has an approximately $400/year ""package fee"" as well as its (quite low) interest. When I finish paying the mortgage, I won't have to pay that fee anymore, so it is theoretically possible that spending extra money on paying off my mortgage would be better than spending it on paying off some other debt. I think it's unlikely that it would actually ever be my optimal move in practice, but the point is, there may be an advantage, financial or otherwise, to getting rid of a particular debt, other than merely removing the burden of interest. Those are special situations, though, and in the majority of cases, starting with the highest interest loan will be the right move."
Depending on who you have the loan through and how they figure the interest charges (whether daily, monthly, bi-monthly, etc. normally monthly I would assume), your interest is probably figured either daily or once a month.   Let's assume that it is figured daily, otherwise it wouldn't make sense to make bi-weekly payments.   At 4% Annual Interest on a $150,000 home loan the interested added each day is about $16.44, but it doesn't stop there because it is compounding interest daily so the next day it becomes 4% of 150,0016.44 (which is negligibly larger amount) and they will tack on another $16.44. So what will happen is that the amount of interest you owe grows rather quickly, especially if you miss a monthly payment.  Everyone knows that the faster you pay something off the less interest you pay, but not everyone knows the formula for compounding interest.  a quick Google search rendered this site with a simple explanation Compound Interest Formula  unfortunately this formula doesn't take into account the payments being made. The big thing with making your payments bi-weekly rather than a bigger payment once a month is that you pay off some of that principle right away and it won't collect interest for 14 more days. if the interest is only calculated once a month, make your full payment before the interest is calculated, the same goes for your credit cards.
It may have been the standard practice for a long time, and indeed it still is the common practice for my credit union to apply all excess payment directly to the principal. At the risk of sounding a little cynical, I will suggest that there is a profit motive in the move to not applying excess payments to principal unless directly instructed to do so. Interest accrued isn't reduced until the principal is reduced, so it benefits the creditor to both have the money in advance and to not apply it to the principal. You should probably move forward with the expectation that all of your creditors are adversarial even if only in a passive-aggressive manner.
"It's called leverage. Here's an example from real estate. The underlying appreciation on a house in certain parts of America is something like 7% a year. So if you bought the house ""all cash,"" your return would be something like 7% a year. (Actually, a little more, because of the rent you would be collecting, or saving, if you were the ""renter."") Suppose you buy the same house, 20% down, 80% mortgage. The rent pays for your mortgage, taxes, insurance, etc. like it is supposed to. The house goes up the same 7% each year. But now your rate of return is 35%, that is 7%/20% (your down payment). You get the whole appreciation but put up only 20% of the money. The bank (and your renter) did the rest."
"You should look at the opportunity cost for your money (i.e. what kind of return it could generate otherwise).  We took advantage of these types of offer (zero interest for x months) in the past with the goal to redirect the money to the mortgage (it was 7.5% back then) and we made sure we don't get hosed by the surprisingly high interest rate by having a big reminder in the bulletin board in the kitchen to make sure we pay off the money before the interest rate kicks in.  So we basically reduced our interest on the mortgage during that period.  Oh - we use an all-in-one account (Manulife One) so that was real nice. I would stay away from those ""interest-deferred"" offers - it's totally not worth it."
This proper booking will resolve that. When you are comfortable with booking the payments, you can book unrealized gains and losses by marking the house to market in this statement to get a better understanding of your financial position. The cash flow statement with proper bookings should show how the cash has flowed, so if it is according to standards, household operations should show a positive flow from labor/investments less the amount of interest expense while financing will show a negative flow from principal repayment. Investing due to the home should show no change due to mortgage payments because the house has already been acquired, thus there was a large outflow when cash was paid to acquire the home. The program should give some way to classify accounts so that they are either operational, investing, or financing. All income & expenses are operational. All investments such as equities, credit assets, and the home are investing. All liabilities are financing. To book the installment payment $X which consists of $Y in interest and $Z in principal: To resolve the reduction in principal: As long as the accounts are properly classified, GnuCash probably does the rest for you, but if not, to resolve the expense: Finally, net income is resolved: My guess is that GnuCash derives the cash flow statement indirectly, but you can do the entry by simply: In this case, it happily resembles the first accrued entry, but with cash, that's all that is necessary by the direct method.
Both Credit Card and Mortgage work on same principle. The interest is calculated on the remaining balance.  As the balance reduces the interest reduces. The Mortgage schedule is calculated with the assumption that you would be paying a certain amount over a period of years. However if you pay more, then the balance becomes less, and hence the subsequent interest also reduces. This means you would pay the loan faster and also pay less then originaly forecasted. The other type of loan, typically personal loans / auto loans in older days worked on fixed schedule. This means that you need to pay principal + Pre Determined interest. This is then broken into equal monthly installment. However in such a schedule, even if you pay a lumpsum amount in between, the total amount you need to pay remains same. Only the tenor reduces.
"The ""pure play"" would be using interest rate options.  http://www.cboe.com/Products/InterestRateOptionsSpecs.aspx"
I don't have a solid data-backed answer, but this is too lengthy for a comment. I've read that on average, about 1-2% is what you can get as a cash discount on a home purchase, all else being equal, but no hard data to back that.  In certain situations it makes sense for a cash discount to be much greater than that, for instance, if the seller is in a hurry to close and your cash offer has no inspection clause. Similarly, if a house has been re-listed after a sale fell through you might get a greater cash-discount, or if an owner just over-values the advantages of a cash-offer. Anecdotally, I had a neighbor take a cash offer 5% below asking and they had multiple offers at asking, they took the cash offer so they could close faster (15 days). Also, I've lost out to a cash offer, also at 5% below asking, and they also had a short-closing period and no-inspection, my offer was over asking on that one, so total cash discount > 5%. There can be more volatility in the luxury home market, but I wouldn't guess that changes the cash vs financed evaluation much.  Would love to see if anyone finds a good source, but even if they do, an average is only so helpful.
If the savings rate is the same as the loan rate, mathematically it doesn't make any difference whether you pay down the loan more and save less or vice versa. However, if the loan rate is higher than the savings rate it's better to pay it down as fast as possible. The chart below compares paying down the loan and saving equally (the gradual scenario), versus paying down the loan quickly at 2 x $193 and then saving 2 x $193.  The savings rate, for illustration, is 2%. Paying quickly pays down the loan completely by month 51.  On the other hand, in the gradual scheme the loan can't be paid down (with the savings) until month 54, which then leaves 3 months less for saving.  In conclusion, it's better to pay down the higher rate loan first.  Practically speaking, it may be useful to have some savings available.
"Will the proportion of my payments towards interest eventually go down?  Yes. Today would be a good day to do a web search for ""amortization schedule"". You will quickly learn how to compute precisely how much of each payment goes to interest and how much goes to principal given different payment choices. Would it be wiser to spend more each month on loan payments? That depends on your goals and resources, which we know nothing about. If you have extra money you could spend it on debt reduction, or you could spend it on an investment that pays more money in growth or dividends than the interest you'd save. Or you could decide that the longer you have that loan, sure, the more interest you'll pay, but inflation will make future money less valuable. Basically, by taking out a loan you have chosen to gamble that the thing you bought with the loaned money will be worth the cost of the interest payments in the future, adjusted for inflation. The bank on the other hand is gambling that you're good for the debt and that they can make a reasonable profit off it. If you have more money to gamble with, which bet is the wisest one is really up to you. would it be smarter to try to pay off one loan before the other? If you want to pay off a loan early then always choose the loan with the higher interest rate. should I start making bi-weekly payments instead of monthly? That's roughly equivalent to paying off the principal by one additional payment a year. There are two reasons to do so.  The first is that the total interest will be lower and the loan will be paid off faster. You can work out exactly how much with your new found skill at amortization computation.   The second is the simple convenience of knowing that your budget for each pay period is the same.  That convenience is worth something; is it worth the amount extra you'll be paying every year? Again, this is for you to decide. Work out how much extra you're paying per year and how much you're saving in the long run, and compare that against the benefit."
No. The intro rate is a gambit by the bank - they accept losing money in the short term but expect to gain money in the long term when your intro is over and you (hopefully) start paying interest. There's not much in it for them if you never get around to paying interest. Same can be said for people who close the card after their intro period, but that's different - the bank is correctly expecting that most people won't bother.
There are few different types of MI you can choose from, they are: Borrower-Paid Monthly (this is what most people think of when they think MI) Borrower-Paid Single Premium (you may have QM issues on this) Lender Paid Single Premium Split Up-front and Monthly The only way to determine which option will ultimately cost you less is to come up with a time estimate or range for how long you anticipate you will hold this mortgage, then look at each option over that time, and see where they fall. To answer your question about the single-premium being added to your loan, this typically does not happen (outside of FHA/VA).  The reason for that is you would now have 90%+ financing and fall into a new pricing bracket, if not being disqualified altogether.  What is far more typical is the use of premium pricing to pay this up-front premium.  Premium pricing is where you take a lender credit in exchange for an elevated rate; it is the exact opposite of paying points to buy down your rate. For example:  say a zero point rate is 4.25%, and you have monthly MI of say .8%.  Your effective rate would be 5.05%.  It may be possible to use premium pricing at an elevated rate of say 4.75% to pay your MI up front--now your effective rate is the note rate of 4.75%.  This is how a single premium can save you money.  Keep in mind though, the 4.75% will be your rate for the life of the loan, and in the other scenario, once the MI drops off, the effective rate will go back down from 5.05% to 4.25%.  This is why it is critical to know your estimated length of financing.
Well, what you are asking is EMI, which comes to 30.78 in your case.  The formula you are applying is of compounding a value, which is completely different.  In EMI, person keeps paying money every month or any other period as specified. This amount is firstly allocated towards the interest for the period and the balance for principal amount. So, in effect principal keeps decreasing and subsequently interest thereon. Also, since, interest is getting paid every time it becomes due, compounding actually do not happen at all.  In the case of compounding, interest gets applied at certain interval, but do not get paid. So, in effect every time when interest gets applied, it applies on complete Principal outstanding as well as interest unpaid. Hence, this complete amount gets payable at the end. In this case, total amount payable is obviously high, because of 2 reasons: 1. Since, Principal gets unpaid during whole period, you are paying interest on complete amount for complete period.  2. You will be paying interest on interest (compounding of interest) since you are not paying it as it is becoming due. Hence, both are different. You need to find EMI calculator or EMI formula, to achieve your purpose. EDIT: The formula for calculating EMI: Assuming a loan of Rs. 1 lakh at 9 % per annum, repayable in 15 years, the EMI calculation using the formula will be: EMI = (1,00,000 × 0.0075) × [(1 + 0.0075) 180 ÷ {(1+0.0075) 180 } - 1] = 750 × [3.838 ÷ 2.838] = 750 × 1.35236 = 1,014
"Outstanding principal balance is the amount you owe at any given time, not including the amount of interest you need to pay as soon as possible. The ""capitalized interest"" shown is consistent with an average of 13.5 months between when each dollar is borrowed and when the repayment period begins. Suppose you borrow the first half of the money on September 1, 2017 and the second half of the money on February 1, 2017 (5 months later).  At that point, half the money has been accruing interest for 5 months.  On January 1, 2018, half the money accrued interest for 16 months, and half the money accrued interest for 11 months.  The lender now expects you to start repaying the loan, with the first payment due at the end of January 2018 or the beginning of February 2018.  If you make the minimum payments on time, the lender expects you to make 120 monthly payments.  The last monthly payment would be at the end of December 2027 or the beginning of January 2028. The lender (or the website) should provide details about the actual payment plan, grace periods, provisions for handling inability to pay due to unemployment, and other terms. In the United States, most installment loans pretend that (for purposes of calculating interest) every month has 30 days -- even February and July!  Each month, 1/12 of the ""annual percentage rate"" (APR) is charged as interest.  If you do the compounding, a 6.8 percent APR corresponds to (1 + 0.068 / 12)^12 - 1 = 7.016 percent ""annual percentage yield"" (APY). Also, the APR is understated.  The 6.8 percent applies to the full balance (including the loan fees), even though the borrower only gets the amount minus the loan fees.  The 6.8 percent rate is useful for doing calculations after the loan fees have been charged, though.  These calculations include the capitalized interest and the monthly payment amounts. A true calculation of the APR would take the loan fees into account, and give a higher number than 6.8 percent.  But the corrected APR would not be useful for calculating the capitalized interest, nor for calculating the monthly payment amounts."