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Understanding “Per Thousand Financed”

When you’re exploring financing options for a car, a home, or even a business, you’ll often encounter interest rates expressed as an Annual Percentage Rate (APR). While APR gives you the overall annual cost, it can sometimes be helpful to understand the cost in smaller, more manageable units. This is where “per thousand financed” comes in handy. It’s a straightforward way to estimate your monthly payment based on the amount you’re borrowing.

Essentially, “per thousand financed” represents the dollar amount of your monthly payment for every $1,000 you borrow. For example, if the financing is quoted as $20 per thousand financed, then for every $1,000 you borrow, you’ll pay $20 each month. If you’re borrowing $10,000, your monthly payment would be roughly $200 (10 x $20). If you are borrowing 50,000 your monthly payment would be 1,000 (50 x $20)

How to Calculate It (Roughly):

While lenders often provide this figure directly, you can estimate it using loan calculators available online or even a spreadsheet program. The key ingredients are the APR, the loan term (in months), and the amount financed. These calculators use complex formulas to determine the exact monthly payment, but the “per thousand financed” figure is easily derived by dividing the monthly payment by the number of thousands borrowed.

Why is it Useful?

Quick Comparison: “Per thousand financed” allows you to quickly compare different loan offers, even if the loan amounts vary. Instead of focusing solely on the APR, you can see the real impact on your monthly budget.
Budgeting: It simplifies budgeting. Once you know the amount you plan to finance, you can easily estimate your monthly payment by multiplying that amount (in thousands) by the “per thousand financed” rate.
Understanding the Impact of Loan Term: Shorter loan terms typically have a lower “per thousand financed” rate, but higher monthly payments. Longer terms reduce the monthly payment but increase the overall interest paid, resulting in a higher “per thousand financed” rate. This helps you weigh the pros and cons of different term lengths.

Important Considerations:

Fees and Charges: “Per thousand financed” typically doesn’t include any upfront fees or charges associated with the loan. These fees, like origination fees or appraisal costs, will increase the total cost of the loan. Make sure you factor these in when comparing options.
Accuracy: The “per thousand financed” figure provides an estimate. The actual monthly payment might be slightly different due to rounding or other factors. Always confirm the exact monthly payment with the lender.
It’s Not Everything: While a useful tool, “per thousand financed” shouldn’t be the only factor in your decision. Consider the lender’s reputation, customer service, and any other loan features that are important to you.

In conclusion, “per thousand financed” offers a valuable perspective on loan costs. By understanding this metric, you can make more informed decisions and find the financing option that best suits your financial needs.