Daniel asks…

## Anyone w/any suggestions on consolidating private college loans? The interest rate is HIGH.?

I took two large private college loans and the consolidation companies won’t consolidate because they’re not “federal” loans. They’re Nellie Mae and Key Bank college loans. anyone With any idea how I can lock in somewhere at a low **interest** rate while paying?

### John answers:

The good news is that you can consolidate private loans. The bad news is that you aren’t going to get a low interest rate on a private loan consolidation. Private loans don’t offer much “wiggle room” with respect to borrower benefits. Still, research as many private loan consolidators as you can and see who offers the lowest rate.

Www.finaid.org (a great resource) offers a list of private loan consolidators, as well as some sound advice. Here is their list: http://www.finaid.org/loans/privateconsolidation.phtml… {Note: Sallie Mae recently came out with a private loan consolidation product which finaid.org doesn’t have listed yet.}

Not to push a certain company, BUT, of the companies listed above, you might look first at Sallie Mae, Key Bank, Wells Fargo, and NelNet, as they are established education loan lenders. Some lenders on www.finaid.org’s list may no longer offer private consolidation; others may require at least some of your loans to have been borrowed through them to begin with. Key Bank’s program does not require that you have loans with them in order to consolidate with them now.

Take advantage of as many benefits as you can: consider having your payments automatically deducted from your checking/savings account each month — it can often save you .25% off your interest rate.

Sharon asks…

## Mortgage loan interest calculation?

I am moving across the country for a new job and am trying to decide whether to buy a house or rent for a year first. To determine what to do, I am trying to algebraically calculate the **interest** rate where a conventionally financed **loan** would be overall exactly expensive as an FHA financed **loan**. This will help me determine whether or not, and if so how much, credit I would need to build before I want to buy a house.

The monthly payment formula Pr/(1-(1+r)^-n) gives a monthly payment for a fixed-rate **loan** given the **interest** rate, amount borrowed, and number of payments, where P = amount borrowed, r = monthly **interest** rate, and n = number of months over which to pay the **loan**. I am trying to solve for r in the equation :

P(0.002975) / (1-(1.002975)^-360) + 88 = Pr / (1-(1+r)^-360) + 9

where the trailing constant term is the mortgage insurance for the different **loan** types.

Solving for r tells the % monthly **interest** rate for a conventional **loan** that will be equal in total cost to an FHA **loan** over a 30-year payment plan. I need this so that I can tell which **loan** type would be better for me to choose depending on what rates I am offered. (I am going to write a computer program to determine this rate based on the purchase price and payment term.)

I feel dumb asking this question, but I am super rusty on anything dealing with logs and variable exponents. Most of my recent math work has been vector/matrix algebra, and I fear I have lost touch with my arithmetic algebra.

Any help would be greatly appreciated!

This isn’t a homework assignment. I’ve never taken a finance class in my life, so this about as far away from my homework as writing an english paper.

I know the **interest** rate doesn’t affect credit rating. I am trying to see what is the better **loan** option to compare to renting and THEN buying. Having a better credit rating usually affects the **interest** rate on a **loan**.

I am not trying to set up a matrix for the calculation. A matrix is a two dimensional set of values, not an equation. Matrices are something entirely different. I was merely explaining my lack of recent algebraic practice.

I know I can estimate the price and make adjustments, but I want the ability to calculate this programatically so that I don’t have to work it out on paper every time. This will give me the ability to determine what is the best purchase price for a house based on the **interest** of the **loan** that I qualify for depending on the state of the market.

What I am looking for is a way to manipul

Oh, also Rob, I agree with you on every account, however, I have a family and can’t afford to bounce around. If I were single I think I could couch surf for an entire career, but with wife and child, it would be quite difficult. Lol.

### John answers:

Worst thing u can do is buy first year.

Simple.

U making work for yourself that isn’t needed.

Get the job.

Live in long term stay motels first 3 months

as u learn where NOT to live.

Nothing says smart as needing to ‘carry’ and

drive an hour each way to work.

Check out each area of interest with a zip code data

and on Fri, Sat nites. Again need to ‘carry’ or not.

Rent small safe cheap places as u Save and learn

where to buy or not.

Do get and study

House buying kit for dummies, Tynsen.

Total money make over, Dave Ramsey.

Will save u decades and 10,000s$ in hard

life lessons by learning from others dumb

mistakes, not your own.

Is faster , cheaper, easier that way.

Good knowledge is good luck.

Both u need.

John asks…

## How much interest will I save on Car loan?

Hello. I’m trying to find out how much **interest** I would **save** on my car **loan** if I were to use this years Income Tax refund (about 5k) to pay it towards the principle and if it’s worth doing so. I have looked online but only found calculators for added monthly payments not lump sum payments.

Here are the numbers:

**Loan** Acquired: Dec 2013

Annual Percentage: 20.50% (25 w/ no credit history besides student loans and one charge off)

Finance Charge: $5,915.75

Amount Financed: $11, 692.00

Total Payments: $17,607.75

Total Sale Price: $21,107.75 (including my down payment of $3,500.

PS: there is no prepay penalty and unfortunately I couldn’t wait until income tax to buy a car as I work out of my city and go to school out of my city as well.

This is my first **loan** and I know it’s not the greatest terms but I needed a reliable replacement car after my last car was stolen. I’m just trying to pay off early and **save** as much as possible.

Please no comments regarding savings I have money coming out of each paycheck going in a savings I just need help determining how helpful it will be to put 5000 towards my car **loan** this income tax season. Thank you

### John answers:

Assuming it’s a 5 yar loan, I come up with a monthly payment of $313.

Adding a $5,000 one time payment this month would have you paying off the car about 2 1/2 years early. Your payments will total $9200. When you add the $5,000 payment, you’ll end up paying a total of $14,200.

That’s about $4,000 less than you would have paid if you just made the regular monthly payments.

Steven asks…

## I wan to do a balance transfer, but will I save some money?

1. Current car **loan** down to $ 2800.00. At an **interest** rate of 10.16%.

2. I have a cc with no transfer fees, but at a variable rate of 8.99 %. There is no balance on it now.

3. can I **save** money here?

### John answers:

Dear “tvman”:

Well, “save” would not be a word I use when talking about loans! That’s a joke. I’d reserve the word “save” for when you’re collecting the interest. If for no other reason than to keep your thinking straight.

So, to confirm I understand the opportunity, it APPEARS that 0.1016 minus 0.0899 equals 117 basis point for possible savings.

I’d suspect that they tiny “savings”, what really should be called “cost avoidance”, are illusionary.

First, when car loans are give, they often use a method interest calculation called the “Rule of 72”. Without going into too much detail. You pay the interest more in the front of the loan’s term than the end. It’s like a penalty for prepayment. So, moving from the car loan, may not avoid any interest.

Second, the credit card is variable. You didn’t say what the adjustment interval was AND credit cards have a lot of “springloaded traps” that can send the interest rate into “orbit”.

SO, I’d recommend NOT transferring. Stay with what you know.

If you want something to ACT on, I’d suggest that you find a credit union to do business with. They can help you shift from “borrowing” to “saving”. Credit Unions don’t use the 72 or any other such trickery; most use daily calculations which are most favorable to the borrower. They do low cost banking with education.

Hope this helps. I’m interested how it works out for you. Drop me a note sometime. My blog may have helpful “stuff”.

Ferdinand J. Reinke

Kendall Park, NJ 08824

Webform that creates an urgent email => http://2idi.com/contact/=reinkefj

Web page => http://www.reinke.cc/

My blog => http://www.reinkefaceslife.com/

LinkedIn url => http://www.linkedin.com/in/reinkefj

Donna asks…

## Math word problem, % loans, interests?

This is not for school, I am a grown man. I made up this problem to better understand percentages and loans.

Word problem as follows:

Jack has two loans.

**Loan** A has a balance of $2,000 at 5%.

**Loan** B has a balance of $3000 at 5%.

Susan has one **loan** of $5000 at 5%.

All other variables are constant. Who pays more interests per year?

A. Jack pays more **interest**.

B. Susan pays more **interest**.

C. They both pay the same amount of **interest**.

### John answers:

The answer to this is c

look at it like this…..interest = x

2000x + 3000x = 5000x

got it??

But, take it to a whole new depth of real world interest….

Save this equation somewhere, because you will need it for any future interest problems 😉

p = principle

r = annual interest rate(in decimal form)

c = how many times per year it is compounded

n = number of years projected

v = projected value

p * (1 + r / c)^(nc) = v

sample

take 1000.00 @ 10% for 10 years

some will tell you that’s 1000.00 interest for the first year

that WOULD be true, if it was compounded only once per year

but this is hardly ever the case(usually monthly, or even daily)

back to our sample 1000.000 @ 10% for 10 years

1000 * (1 + .10 / 12)^(10 * 12) = v

1000 * (1 + .0083)^120 = v

1000 * (1.0083^120) = v

1000 * 2.696 = v

2696 = v after 10 years

NOTES: the .10/12 represents the 10% interest broken into 12ths

the exponent (10*12) represents the amount of times this is being compounded over the course of the 10 years

take our previous example and work it out for compounded daily, the number should end up higher(im going to show partial numbers on here, but leave the long version in my calculator as im going, since the numbers are going to get quite fractional)

1000 * (1 + .10 / 365)^(365*10) = v

1000 * (1 + .00027)^3650 = v

1000 * 1.00027^3650 = v

1000 * 2.72 = v

2720 = v after 10 years compounded daily

you can see, slightly higher than compounded monthly

this is your apy, annual percent yeild

apr is 10%

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