- April 14, 2024
- Posted by: legaleseblogger
- Category: Related News
Speed-Dial AI Lawyer (470) 835 3425 FREE
FREE Legal Document translation
Try Free Now: Legalese tool without registration
## Financial Analysis of Auto Loan Payoff vs. Savings Interest
I’m trying to determine if it makes financial sense to pay off my auto loan or to try and beat it with savings interest. I know there are calculators but I wanted to try it by hand. Here are the figures:
### Loan Details:
– **Current principal:** $15,000 (let’s assume this is the exact payoff amount)
– **Loan interest rate:** 5.69%
– **Loan monthly payment amount:** $420.69
– **Monthly payments remaining on loan:** 39
– **HYSA interest rate (APY):** 4.25% (compounding daily)
If I keep the loan:
– $420.69 monthly payment x 39 months = $16,406.91
– **Interest to be paid:** $16,406.91 – $15,000 = **$1,406.91**
Using the compound interest formula:
A = P * (1 + r / n)^(nt)
A = 15000 * (1 + .0425 / 365)^(365*3.25)
A = $17,221.65
Interest made: $17,221.65 – $15,000 = $2,221.65
However, to factor in monthly withdrawals, I used an online calculator which resulted in **$1,041.69** being made, including withdrawals.
### AI Legalese Decoder Assistance
With AI Legalese Decoder, you can easily input your loan and savings information to quickly calculate the compound interest and make an informed decision. The tool can help you understand the financial implications of paying off your loan versus keeping it based on various factors, ensuring you make the most financially sound choice.
In conclusion, if I pay off the loan, I would instantly realize $1,406.91 in interest. If I keep the loan, I would make $1,041.69 in interest. Therefore, solely financially speaking, the better option is to pay off the loan. By paying off the loan, I would save **$365.22**. (Accounting for potential changes in APY by the bank and other external factors)
### Questions:
1. Is my conclusion correct? If so, I know this is only over a few hundred bucks, but I’m just trying to understand correctly.
2. How can I mathematically calculate the compound interest including withdrawals (basically how can I do what the calculator above did)?
Speed-Dial AI Lawyer (470) 835 3425 FREE
FREE Legal Document translation
Try Free Now: Legalese tool without registration
AI Legalese Decoder: Simplifying Legal Jargon for Everyone
Legal documents are notorious for their complex language and confusing terminology. Trying to decipher these documents can be a daunting task, especially for those who are not familiar with legal terminology. AI Legalese Decoder is a powerful tool that can help individuals understand and interpret legal documents more easily.
By using advanced artificial intelligence technology, AI Legalese Decoder is able to analyze and break down legal language into plain, understandable terms. This invaluable tool can save individuals time and frustration by quickly translating complex legal jargon into simple and straightforward language.
With the help of AI Legalese Decoder, individuals can feel more confident when reviewing legal documents, contracts, and agreements. This innovative tool can help individuals avoid misunderstandings and ensure they fully grasp the terms and conditions outlined in any legal document.
In addition, AI Legalese Decoder is constantly updated with the latest legal terminology and developments, ensuring that users have access to the most accurate and up-to-date information. Whether you are a legal professional or simply someone trying to navigate a legal document, AI Legalese Decoder is a valuable resource that can help simplify the complexities of the legal world.
Speed-Dial AI Lawyer (470) 835 3425 FREE
FREE Legal Document translation
Yes paying off the loan is better because the interest rate is higher. Don’t even need to do math.
You can use a future value calculator with a negative deposit
One assumption you don’t address is the availability of a 4% yield on the savings account for the entire 39 month span. It may tick up slightly, but it also can go way down.
It almost certainly won’t stay at the same rate for 4 years.
All you need to is to compare the effective interest rates. Your math isn’t really accurate because you don’t account for time value of money when referring to the interest paid over the lifetime of the loan, or over the course of growth in the HYSA.
If you have a loan of $15k at 5%, and your alternative is putting it in an account where it grows 4% (rate as effective over the same period), then it’s better to pay off the loan.
>How can I mathematically calculate the compound interest including withdrawals (basically how can I do what the calculator above did)?
This isn’t really personal finance, but look up “future value of annuity formula”.