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Dear Terry,
I purchased a car and my contract is a simple-interest
loan, but I'm not sure what kind of contract this
is. Please help!
-- Isla
Dear Isla,
Here's Bankrate's definition of a simple-interest loan:
A method of allocating the monthly payment between interest and principal. The interest charged is determined by the unpaid principal balance on the loan, the interest rate and the number of days since the last payment. The rest of the payment goes to the principal. Making early payments or additional payments will reduce the loan's principal and cut the total interest paid over the life of the loan.
I hope that helps. But in the future, you really should never sign a contract without an explanation of all the terms.
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