math question

[bertha katzenengel]

What is the interest rate if a loan of $5,000 was taken out one year ago, the payments are $252, and the current balance is $5,325? I had lunch today w/ a friend at work who is laboring under this ridiculous loan.... :grr:

[Renew Deal]

1. Edit: hmmmm

I don't know if you will find a mortgage calculator that can do that.

[Kikosexy2]

2. I hate...

fuzzy math.. but good luck.

[AllegroRondo]

3. WTF?

He took out a loan of $5,000 and the current balance is $5,325? At this rate he will NEVER pay it off.

[Renew Deal]

5. Never pay it off?

That would be a best case scenario. This is bizzare. The interest must be way above the minimum payment or the numbers are wrong.

[bertha katzenengel]

6. He said he thought it would take 9 years at this rate to pay it off...

I'm so fucking clueless it boggles the mind. I don't know shit about this shit, man!

[Zan_of_Texas]

10. that loan makes no sense. Are you sure you have the nos. right?

Begin owing $5,000.

Make monthly payments of 252? Right, monthly?

That's $3,024 in one year, of payments.

Current debt is OVER $5,000?!?!?

That's nonsense.

My financial calculator says - ERROR - give me the right numbers!

[bertha katzenengel]

11. Those are the numbers he told me.

Now, this is just in conversation, over the cheapest lunch possible -- hot dogs -- because he is so broke. He needed a shoulder to cry on because of how bad his credit is. He said this was a kind of a "loan shark" arrangement. :shrug:

[dhinojosa]

12. That's right. It will take 2 (1.8) years to pay it off with interest.

If my calculations are right, assuming he's been paying off a month.

[northzax]

16. well, it kinda works a little

assume 61% interest on a 108 month loan of 5,000 (the only way to get payments if 252 bucks) in the first year, he's only actually paying 10 in principal, and one or two missed payments, with fees of 50 bucks each, gets him to 200+ over 5,000.

an approximation:

Mortgage Amount: $5,000.00
Interest Rate: 61 %
Mortgage Length: 10 Years

Year Interest Principal Balance
2004 $3,047.35 $10.62 $4,989.38
2005 $3,038.71 $19.26 $4,970.12
2006 $3,023.06 $34.91 $4,935.21
2007 $2,994.67 $63.30 $4,871.92
2008 $2,943.21 $114.76 $4,757.16
2009 $2,849.91 $208.06 $4,549.10
2010 $2,680.75 $377.21 $4,171.89
2011 $2,374.07 $683.90 $3,487.99
2012 $1,818.03 $1,239.94 $2,248.05
2013 $809.92 $2,248.05 $0.00
2014 -$1,017.83 $4,075.79 $0.00

[dhinojosa]

4. 6.5% a year it looks like. nt

[sir_captain]

7. Well

I'm in a rush, and we don't have enough information here to figure out the exact rate, since we don't know how the interest works or when your friend paid the $252, but over the course of a year, $325 is about a 6.5% yearly interest rate, which isn't that terrific, but I suppose is about akin to a long-term mortgage interest rate.

[FloridaPat]

8. Somewhere around 70%. That's a little steep. I can lend your friend

money at 50%. Email me if he's interested. Just joking.

[DemoTex]

9. Sounds like your friend got a loan from Flem Snopes.

Faulkner's Flem Snopes would loan $5 and get repaid a dime a week forever. That got Flem the mansion (The Mansion).

[northzax]

13. put it this way

on a 108 month loan of 5,000 to get to monthly payments of 252, you're looking at roughly 61% interest.

you've got some numbers wrong here.

[billyskank]

14. Um

did this loan come from the kind of company that breaks your legs if you fall into arrears?

[bertha katzenengel]

17. I asked him that. He said it's not quite that bad, but didn't go into

detail. It kinda scares me.

[Guaranteed]

15. Nevermind...

yeah, that's REALLY steep.

[Ron Green]

18. There had to be some kind of origination fee to bump it up over $5000 in

the first place.

[Worst Username Ever]

19. That interest rate is ridiculously high. Here is the math.

Since the balance is NOT getting smaller, that means that the loan payment is INTEREST ONLY. 252 time 12 months = $3024 in interest a year. That is roughly 60% interest (3024 divided by 5000).

[Speck Tater]

20. Clearly there was an initial "finance charge"

added to the balance. The balance before the very first payment was probably something like $6,000 or more.

I had a loan like that once. I made the scheduled payments for almost a year before I noticed on the monthly statement that the principle wasn't going down at all! Then I started doubling up the payments and paid it off in 14 months. If I hadn't done that I'd still be paying on it now, 10 years later.