What is a simple interest retail installment contract

Facebook Twitter. What is a Simple Interest Contract? The Difference Between Simple Interest and Precomputed Contracts Since interest is calculated daily , and simple interest contracts give customers the opportunity to only pay interest on the current balance of their loan. Products Included in Simple Interest Contracts Simple interest contracts vary, but Mission Financial provides more than just financial independence.

Towing M. Trip Interruption If a breakdown occurs when you are further than miles from home, M. Lockout Services In the event that you get locked out of your truck, M. Flat Tire M. Battery Boost If a battery boost is needed, M. Benefits of Financing with Mission Financial As a commercial driver, it is imperative to have reliable protection and coverage plans in the event of a break down, blown tire, or other incident on the road.

Sign Me Up! Stay up to date with the latest news in the commercial trucking industry. And that can lead to problems later, especially for financial institutions that service both purchase money loans and retail installment sales. Now, you may be thinking: "consumers generally don't understand or care about the difference, so why should any of us?

Many of them represent the interests of those consumers. If servicing your retail installment sales as though they are loans is detrimental to consumers, then you could have a problem. Let's focus on one potential pitfall - the accrual of interest on a post-repossession deficiency balance.

Imagine that Friendly Finance Company has two different customers, each of whom has financed the purchase of a new motor vehicle. Customer A obtained a simple interest loan and used the proceeds to purchase the vehicle. The loan bears interest at 8.

Customer B finances the purchase on a retail installment sales contract with finance charges in the form of the time-price differential , having an effective APR of 8.

Now imagine that Customer A and Customer B both default. The creditor repossess their vehicles repossessed and sells them at auction. After the sale, a deficiency balance remains on both accounts. Friendly wants to continue to accrue interest at 8. Can it do so? Probably not. Both are ways for you to obtain a vehicle by agreeing to make payments over time.

In both, you are generally bound to the agreement after signing. A loan is a transaction between you and a bank or other lender for money, where you use the money to purchase a vehicle and agree to repay the loan balance plus interest. A retail installment sale,on the other hand, is a transaction between you and the dealer to purchase a vehicle where you agree to pay the dealer over time, paying both the value of the vehicle plus interest.

The time sale price which is the total of the sale price and the amount, if any, included for insurance, plus the amount paid for official fees and the time price differential ; and p.

If any installment except the down payment is more than double the average of all other installments, there must be a notice, printed in bold type, that the contract is not payable in installments of equal amounts. The retail installment contract does not have to be set forth in a single document. Requirements for Retail Installment Contracts under the Federal Truth in Lending Act For each retail installment contract, the creditor must disclose the following information in writing:.

The identity of the creditor; b. The aggregate amount financed must be disclosed using that term. Note that the amount financed must be disclosed as an aggregate amount in the segregated disclosures, BUT, an itemization must also be disclosed separately. The finance charge must be disclosed using that term. The finance charge must be expressed as a total dollar amount and may not be itemized; e. The annual percentage rate, using that term and using the actuarial method, the U.

The number, amount, and due dates or period of payments scheduled to repay the total of payments; g. The total of payments, which is the sum of the amount financed and the finance charge. If the credit obligation has a demand feature, that fact must be disclosed; i. The total sale price is the total of the cash price of the property or services, additional charges not included in the finance charge, and the finance charge.

A statement indicating whether the consumer is entitled to a rebate of any finance charge or is subject to any penalties upon refinancing or prepayment in full; k. The amount of any late fees; l. Where the credit is secured, a statement that the creditor has a security interest in the property purchased through the credit transaction or in other identified property; m.

The conditions required to exclude voluntary credit insurance premiums and charges and fees paid for debt cancellation coverage from the finance charge.