PriceProtect™
DriveShield™
GarageGuard™
Services
Insurance
Car Insurance
Compare Car Insurance with Jerry
Jerry’s Expert Advice
Car Insurance Estimates
Home & Renters Insurance
Renters Insurance
Repairs
Car Repair Estimates
Repair Estimates for Popular Services
Advice
Read Car Content
Browse Jerry Car Advice
Check Out Expert Car QnA
Learn About How We Create Content
Jerry Data & Research
Are car loans simple or compound interest?
Does a car loan have simple or compound interest? Someone told me that compound interest is better, but I don’t really understand the difference.
Liz Jenson · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
Car loans and financial formulas can be confusing, so don’t worry! When looking at types of interest, car loans are generally
simple interest
. When you are borrowing money, this is a good thing for you. Here’s why:- Simple interest is a percentage of the loan amount. When you sign yourcar loan, you agree to pay a certain sum in interest, which a lender includes in your monthly payments. You pay off that amount as you pay off your loan.
- Compound interest is calculated at each payment. With compound interest, you pay interest on each payment, meaning you could end up paying interest on interest. While it may not be great for car loans, compound interest is good in some circumstances! For example, if you invest, an account with compound interest will earn more money over time than an account with simple interest.
If you’re preparing to take out a car loan, you’ll need to get a car insurance policy, too.
Jerry
makes it quick and easy to find the best rates available on the insurance coverage you want. Just download the app and answer a few questions to see a comprehensive cross-analysis of the best car insurance policies that work for you. The average user saves $879 per year!View full answer
- Gregory R.
WHY YOU CAN TRUST JERRY
Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.
Join 4M+ members in lowering their car insurance
You Might Also Be Interested
Read Advice From Car Experts At Jerry
What Others Are Asking
Browse More Content
Insurance in Your State
Easiest way to compare and buy car insurance
No long forms
No spam or unwanted phone calls
Quotes from top insurance companies