# this does not seem right …. Question of loan?

Deal Score0

I wanted a loan given to my friend \$ 1,000 6.25% April for four months. According to this page (http://www.mortgage-calc.com/amortization/amortization2.html), I just want to make \$ 13.04 profit after four months! Whats goin happening here? It seems I should be more.

Fritz
February 4, 2011 at 7:07 am

My figure is \$ 20.83. However you risk losing \$ 1,000 and a friend.
I

CHEPIBE72
February 4, 2011 at 7:44 am

That is because 4 payments means that he will be paying 1/4 of the principal every time. Which means a lot less interest every month he pays.

Why do you think credit cards charge horrendous interest rates and make your payments low? That way they get good interest rate and you pay very little principal.

Now put that 1K into a 20.99% interest and put it with a payoff of 36 months. Now you see why credit cards make good money.

Best thing is to charge a flat fee instead of interest. That is what I do when I loan money to a friend. Loan the 1K and arrange for like a \$ 25 monthly flat fee.

Good Luck!

stan c
February 4, 2011 at 8:39 am

Just do \$ 1000 x6.25 which comes to \$ 62.50 which equals 12 months. Then you divide the 65.50 divided by 12 which comes to \$ 7.50 per month x 4 = \$ 30.00

bdancer222
February 4, 2011 at 9:19 am

Your 6.25% is an annual rate. You have to convert that to a monthly rate by dividing it by 12. Then multipy the balance by the monthly rate.

knitting bear
February 4, 2011 at 9:27 am

6.25% APR is only 6.25% over the course of a year. That is roughly .52% or .0052 per month interest on \$ 1000 which would be about 20.80\$