12 June 2022 12:21

3 loans under my name, 2 are fixed, one is a declining balance interest loan. Which to pay first?

What is a declining balance loan?

Using the declining balance method, interest calculation is based on the outstanding loan balance – the balance of money that remains in the borrower’s hands as the loan is repaid during the loan term. As the borrower repays installments, the remaining loan balance declines over time.

How is declining balance interest calculated?

What’s the formula for calculating reducing balance interest rate? the interest payable (each instalment) = Outstanding loan amount x interest rate applicable for each instalment. So, after every instalment, your principal amount decreases, which in turn reflects on the effective interest rate.

Which interest rate is better fixed or reducing?

Fixed-rate calculations result in a higher effective interest rate equivalence. On the other hand, reducing rate calculation reflects the effective interest rate initially. Under the flat rate calculation method, interest rates are usually fixed at a lower percentage than diminishing interest rates.

How do I know which loan is better?

The interest rate and/or annual percentage rate (APR) is one of the most important factors to consider when determining which loan is best. For some loan types, comparing interest rates is appropriate, but the APR is a better number to review.

What are the different types of loan interest?

Here’s a breakdown of the various forms of interest, and how each might impact consumers seeking credit or a loan.

  • Fixed Interest. …
  • Variable Interest. …
  • Annual Percentage Rate (APR) …
  • The Prime Rate. …
  • The Discount Rate. …
  • Simple Interest. …
  • Compound Interest.


What is double declining balance method?

The double declining balance (DDB) depreciation method is an approach to accounting that involves depreciating certain assets at twice the rate outlined under straight-line depreciation. This results in depreciation being the highest in the first year of ownership and declining over time.

Is conventional or FHA better?

A conventional loan is often better if you have good or excellent credit because your mortgage rate and PMI costs will go down. But an FHA loan can be perfect if your credit score is in the high-500s or low-600s. For lower-credit borrowers, FHA is often the cheaper option.

Is a refinance worth it?

Refinancing is usually worth it if you can lower your interest rate enough to save money month-to-month and in the long term. Depending on your current loan, dropping your rate by 1%, 0.5%, or even 0.25% could be enough to make refinancing worth it.

What is a loan comparison?

A standard calculation used by lenders. It is designed to help borrowers compare different loan options. For example, a loan with a lower stated interest rate may be a bad value if its fees are too high. Likewise, a loan with a higher stated rate and very low fees could be an exceptional value.

How do I compare loans in Excel?


Quote: Actual cash received adjusted APR and then payment with balloon. And then we can compare just in a little spreadsheet. Here. The different loan options let's calculate the amount to borrow equals.

How do you compare two financing options?

Look for the best deal, and watch out for hidden fees.

  • Look at your financing options’ interest rates. This will affect both your monthly payment and the total amount you pay.
  • Consider the type of financing. …
  • Factor in the length of the loan. …
  • Ask if there are additional fees. …
  • Calculate the total amount you will repay.


How do you compare loans among different lenders?

Consider the following when comparison shopping lenders:

  • Points. Fees that have a link to your interest rate. …
  • Fees. Assorted fees such as loan origination and underwriting fees, broker fees, etc. …
  • Closing costs. The costs associated with closing your loan. …
  • Down payment. …
  • Private mortgage insurance.


How many pre approvals can you get?

You can get preapproved for a home loan as often as you need. Every preapproval letter comes with an expiration date. And, once the preapproval has expired, you’ll need a fresh one to continue house hunting and making offers.

What is the best way to compare mortgages?

Mortgage comparison checklist

  1. Do you want fixed monthly payments?
  2. Compare more than just the rate.
  3. Do you want to add some/all your mortgage fees into your mortgage?
  4. How long is the fixed term?
  5. Do you want the flexibility to overpay, underpay or take payment breaks?

Can I lock rates with multiple lenders?

You can lock in a mortgage rate with more than one lender if you’re willing to deal with multiple mortgage applications, fees, and a lot of paperwork. Some borrowers lock a rate with Lender A and let their rate float with Lender B.

Can you apply for two loans at the same time?

Whilst it’s possible to apply for several loans from different companies at the same time, there’s a good chance it will ruin your credit score and your chances of getting a credit in the future. Sometimes it’s tempting to make multiple applications for credit.

Can I switch lenders after locking?

Can you change lenders after locking a rate? Yes, you can change lenders after locking a rate. But you’ll have to start the application process over with your new lender. That means getting pre-approved, submitting all your documents, and waiting for underwriting — twice.