How does increasing interest rate affect your car loan

Hey friends. I hope you enjoy this one, and hopefully, it helps.

Hey guys welcome back a quick one today something i recently come across with my car loan so you know when you take a loan with a bank to finance your car they charge you a certain percentage of interest so by the end of that loan you know you even know from your contract how much you’ll be paying at the end of your car loan just the interest alone um so the banks

Themselves borrowed the money from a central bank and they are charged a prime lending rate of nine percent and that’s the interest they get charged from by the central bank when they take a loan and then they add a margin of three percent so from that nine percent prime lending rate they added two percent to make their own profit so you you can only pay that nine

Percent if you are someone with a good credit score and you probably have to negotiate that because they only add their three percent or even less than when you are someone with a good credit score they always add something on that nine percent prime learning right it was nine percent though which is i’m gonna touch on it very soon they always add something then

You can negotiate if you know um like your credit score can speak for you you can always negotiate up until they can they charge you only that nine percent they also get charged by the central bank and from there i don’t think you can go any less anyway so you get charged this loan but here’s the thing you already i mean this interest you’re already paying your

Loan you’ve already taken your loan you’ve already charged been charged this this amount of interest then you know this year the interest rate has been increasing over and over and over again and recently the central bank has increased it just after me taking my car and here’s the funny thing i’ve taken my car bought my car signed everything and my interest rate

Was finalized everything was signed was ready to get to like to start paying my first installment then the central bank increased the prime lending rate to 9.70 something um i have it here to 9.75 so that’s the prime lending right it’s no longer nine percent it’s 9.75 percent get guess what happens to my existing loan it changes everything changes because now

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They have to increase the interest that they’ve already charged me even on my existing loan and guess what it’s on their terms and conditions where they talk about interest it says here i need to write this to you the interest rate is a variable rate it is linked to the prime rate by a margin of three percent above the prime rate the three percent i spoke about

And it is therefore subject to change the prime rate as the crime rate changes the prime rate is a date therefore here of oh gosh my tongue the prime rate is at date here of nine percent that was when i was signing this contract and taking this loan and buying my car it was nine percent but because um they gave me the whole september my first installment was

Supposed to go i think because i bought i signed on the 31st of august that’s the day i collected my car they gave me the whole september and then i was going to start i’m going to start paying end of october but even then even if you’ve been paying your loan for months or whatever when the interest changes your whole life changes because that that interest gets

Added i mean it was funny because they added the exact point 75 percent on my loan i mean on my existing interest so i was paying 12 percent and now it’s 12.75 that is the banks it’s it’s very tricky the bank is paying nine percent from to the central bank where they’ve taken this loan they pay nine percent now the central thing increases this to 9.75 percent and

Then that whole point 75 that’s added they’ve added it to my loan as it is so that extra interest has nothing to do with them they are charging it from me and you guys you see how this works it’s very very tricky but yes i i needed to mention this to you guys because i got an email on the 23rd of september and then the email goes like um with effect from uh 23

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September that was the following day no the same day the first national bank prime lending rate has changed to 9.75 percent in light of the fact that you have concluded a variable rate credit agreement the interest rate applicable to your credit agreement will be amended accordingly and i logged into my um to my account on this bank that lended me the loan and the

The loan amount has changed because of this interest which then ended up increasing the monthly installment that i was going to pay can you imagine that so i thought i should mention this because these are the things you need to take into consideration when you are buying your car so imagine if you were already really tight in your budget in your salary in your

Monthly income with the card that you’ve just purchased you’ve already dotted down this um budget and you know i’m paying this amount and then suddenly the amount you are paying for your installment changes it increases you guys it’s not a very large amount of money that increased the installment but it’s still like a lot because i mean it’s something it’s taken

Out of your salary and it also depends on how much the central bank decided to increase the interest it could have been worse so can you see that there’s a lot more other than just choosing the car that you afford and making sure you you not tightening your budget very much because there are the alphonse there are other things like i kinda knew this does happen

But i didn’t expect it to happen um very soon because i think already before i taken my car the interest rate had increased twice this year i knew about this and i knew how it does affect your your existing loan it increases the interest rate of your existing loan which i find it strange but what do i know about finance and then um the installment increases

That’s crazy that’s really crazy like as much as i knew it i’m still really shocked because i didn’t expect it and it’s worrying me because this could have been a much more expensive car do you realize that the bigger the loan the bigger the percentage so a 300 000 rent car this has a 500 000 rents car who’s like it’s obvious that that 500 000 rent car would

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Like will have a much more um let’s say the 100 000 range car increase somebody’s installments with 200 reigns compared with a 300 000 rents car maybe will increase the einstein by 300 and then 500 um 500 000 rents count increase somebody’s installment with 500. that’s a lot of money that’s going to be added to an installment that you are already paying thousands

In because you can’t look at it and say it’s a small money because you it’s added on like say your installment is 6 000 rates and then they’re adding this 500 of course it’s a lot of money okay you guys let’s not keep this long um there’s nothing much to explain here i just wanted to put it out there and to let you guys know um that there’s more like there’s more

To just choosing the car you can afford and or making sure you are for the car you love um there’s this unfortunate circumstances that may rise at any time but it came by surprise because the the interest has been increasing i did not expect this but guess what it is what it is and there’s nothing we can do about that that’s the thing there’s nothing we can change

About it but um all i’m hoping is that none of us gets to retain their car or get to sell their car and downgrade like we just need like i mentioned we just need to to to find more ways to make more money over what we are earning at the moment so that anything that comes you are ready to settle it without them creating your life or without suffering because you

Are just over budget um i hope this helps just keep it in mind and thank you guys for watching and i will see you in the next video foreign

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How does increasing interest rate affect your car loan By Phakama Ntshewula