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when 0% interest is more costly..
there is a scenario:
either 0% interest on loan for year but 5% fees.
or
8.9% interest on loan for 2 years.. but not fees.
what will be the cut-off in terms of months when the 8.9% will make more sense than the 0%. what will be the formula for determining that?
(example. if the loan will be paid back in 40 days, perhaps 8.9% is better? likewise, what is the crossing point in terms of months, when 0% becomes the better choice, in terms in savings on interest).
thx-
either 0% interest on loan for year but 5% fees.
or
8.9% interest on loan for 2 years.. but not fees.
what will be the cut-off in terms of months when the 8.9% will make more sense than the 0%. what will be the formula for determining that?
(example. if the loan will be paid back in 40 days, perhaps 8.9% is better? likewise, what is the crossing point in terms of months, when 0% becomes the better choice, in terms in savings on interest).
thx-
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nickg5
The amount of the loan can be a factor. We are paying on a $6,000 loan at 5.99% APR. That's $359.40 a year or $30 a month. It is worth it, regardless whether it is 3.99% or 5.99%. It will be paid off in one year so the term and the amount is not significant really.