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How often is the interest on car loans compounded?
I was thinking of getting a car loan, but I want to make sure I know how much interest I'm paying. How often do lenders compound the interest?
Eric Schad · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
That’s a smart move to think about interest before getting a
car loan
! Car loans use simple interest, which means you don’t have to worry about compounding.Rather than paying interest on principal plus accrued interest, you only have to worry about paying interest on the principal. Therefore, you won’t spend nearly as much on interest compared to loans that compound interest.
Aside from your car note’s principal and interest, you still have to pay other expenses associated with car ownership. This means that you need to budget for gas, maintenance, a possible emergency fund, and car insurance. While you can’t control how much you spend on maintenance and gas in most cases, you can save money on car insurance.
Try using the number-one-rated car insurance app,
Jerry
, to help you save money. Jerry compares personalized rates from more than 50 top providers and delivers the best deals to your phone in minutes for free. The average Jerry driver saves $879 a year on car insurance!View full answer
- Gregory R.
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Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.
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