Now compare these two sample loans. Note how the interest rate affects the total amount of interest paid.
Interest rate comparison
Loan amount of $10,000 with a 5 year term
|About the loan||Loan A||Loan B|
|Total interest over 5 years||$1,236.92||$4,271.08|
*Please note: the final month’s loan payment may vary from the regular monthly payment.
As for the interest rate, it’s important to shop around. Some lenders may give you a lower rate than others. In general, the shorter the term, the lower the interest rate.
By getting a 5% interest rate vs. 15%, this borrower would save over $3,000 interest over five years!
Note: Always try to get a loan with the lowest interest rate you can. Remember: a strong credit score may help you qualify for a lower interest rate.
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