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Understanding Your Monthly Car Payment: Part Two | Luther Westside Volkswagen

Welcome to part two of our series about understanding car loans! (If you haven’t already, you can check out part one here.)

This week, we’re looking at interest and amortization. These two things make up the difference between paying off a loan and paying for a car completely in cash (and are what make the process a little confusing).

Interest Types

There are two different types of interest: simple interest and compound interest.

Simple interest is calculated on the total amount of your loan, while compound interest is more complicated and has to do with the accumulated interest…

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