How to figure interest

Question

Can someone help me with financing? If I had a MH for sale for $8000 and charged 10% interest, how do you figure it? Surely its not just adding 10% to the total for $8800, is it? Is it compound interest?

Any help would be appreciated.

Mike G. · Answer

@James Gravitt for more insight on this topic i would steer you toward a book called "Deals on Wheels" by Lonnie Scruggs. you can find it and his other books at cashflowdepot.com.

James Gravitt · Answer

Thanks guys, for all your help.

Bill Gulley · Answer

Hi, here's another approach, 8000 X .10 divided by 360 times the days interest to the payment date. Payment amount less the interest accrued (ie. for 30 days) (all months have 30 days) is the principal application or amount to apply to the loan balance. Subtract that from the 8000 and you get a new balance. Repeat for the number of periods you want to amortize. Bill

Josh Green · Answer

there are 2 methods....simple interest and compound interest.

simple is basically principal x interest x term. if you did $8000 @ 10% for 3 year then it would be $2400 in interest for the year. this is calculated on the ORIGINAL principal amount only.

compound is charged on the original principal amount PLUS all accumulated interest from prior periods.
$8k @ 10% for 3 years
year 1: 8k x .10 x 1 = 800
year 2: (8k+800) x .10 x 1= 880
year 3: (8800 + 880) x .10 x 1 = 968
the total interest paid using compund would be $2648

Jon Holdman · Answer

If you're referring to an amortized loan, like a car loan or a mortgage, you do the math with a financial calculator or Excel.  You then get the total interest paid by multiplying the payment by the term and subtracting the financed amount.

You're missing a key parameter, which is the length of the loan.  Assuming its 10 years, it works like the

Loan amount: $8000
Rate: 10%
Term: 10 years
Payment: $105.72
Total of payments: $12,686.47
Total interest: $4,686.47