Which loans compound daily?

[dentwannabe]

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I know its a very basic question, so I figure I'll ask on here.

I thought all our loans (stafford unsubsidized and private loans) compounded yearly while in school? Or is it DAILY?

 

[SatanicMonkey]

They compound hourly..

 

[dentwannabe]

They compound hourly..

haa. haa. you're funny. Loser. 👎

i got the answer to my question: federal loans are compounded daily whereas private loans very (monthly, quarterly, yearly, etc.).

 

[JohnDoeDDS]

WHat? The Federal PLUS loan is compounded yearly. At least from what I understand....

Are you saying that it gtes compounded at 8.5% every day???

 

[TucsonDDS]

The frequency of the compounding doesn't matter for the most part. When you look at two different loans, one compounding monthly and the other compounding daily the total amount of interest that you accrue will be pretty much the same as long as the Annual Percentage Rate (APR) is the same. The only time it may make a difference would be the last payment and then probably only by a couple of dollars. In other words, don't worry about the rate of compounding, only worry about the APR because it already takes the compounding into account. Now when you get a loan, say for a mortgage, you will see two different interest rates. The actual interest rate for the loan and the APR. A lot of mortgage companies like to tell you the interest rate. They say we have loans at 5.9% and so on. Sounds like a great deal. Then you look at the actual APR and it says 6.5% like every other loan on the market. That is because after the compounding and other fees are taken into effect the actual cost of loan to you becomes 6.5%, the APR.

 

[aphistis]

The frequency of the compounding doesn't matter for the most part. When you look at two different loans, one compounding monthly and the other compounding daily the total amount of interest that you accrue will be pretty much the same as long as the Annual Percentage Rate (APR) is the same. The only time it may make a difference would be the last payment and then probably only by a couple of dollars. In other words, don't worry about the rate of compounding, only worry about the APR because it already takes the compounding into account. Now when you get a loan, say for a mortgage, you will see two different interest rates. The actual interest rate for the loan and the APR. A lot of mortgage companies like to tell you the interest rate. They say we have loans at 5.9% and so on. Sounds like a great deal. Then you look at the actual APR and it says 6.5% like every other loan on the market. That is because after the compounding and other fees are taken into effect the actual cost of loan to you becomes 6.5%, the APR.

My wife, who works in finance, usually refers to the APR as the "actually paying rate" for the reasons Tucson mentioned. The frequently of compounding, on the other hand, isn't a significant influence on the amount you pay.