Financial Literacy: Auto Loans, Amortization, BNPL, and Debt Management

Amortized Loan

A loan with equal monthly payments where part goes to principal and part to interest.

Why BNPL can be risky

Easy to overspend, multiple payments stack up, late fees hit you FAST.

How BNPL becomes problematic

Multiple payments from multiple purchases pile up and make you fall behind.

Janet Monthly Payment

~$185 (approx depending on calculator)

Month 1 Breakdown

More interest than principal.

Why Month 2 changes

As principal gets lower, interest gets lower too.

Total Interest Paid (2 yrs)

Around ~$900-$1,000 depending on calculator.

Total Trip Cost

Loan + interest (about $4,400-$4,500 total).

One-Time Extra Payment Effect

Lowers interest overall + pays loan off earlier.

$100 Extra Every Month - Interest Impact

Saves lots of interest.

$100 Extra Every Month - Loan Length

Pays off WAY earlier.

4-Year Loan Monthly Payment

Lower monthly payment.

4-Year Loan Total Interest

Much MORE interest over time.

4-Year Month 1 Interest vs Principal

Interest makes up a bigger portion.

Why this increases total interest

Paying slower = more time for interest to add up.

Benefit of Longer Term Loan

Lower monthly payment.

Advice for Janet

Keep loan short if possible; pay extra if you can.

Explain Amortization

Each monthly payment has interest + principal, and the mix changes over time.

Special Offers in Car Ads

Low APR, cash back, "$0 down," long terms.

Car Buying Advice

Bigger down payment, shorter terms, check credit score, don't overspend.

Larger Down Payment Saves You Money Because…

Lower monthly payment; less interest overall.

Higher Credit Score Means…

Lower interest rate.

Longer Term Loan Means…

Lower monthly payment but MORE interest.

Leasing vs Owning

Leasing = renting the car short-term, you don't own it.

First Step in Car Buying

Create a budget + check your credit score.

Effect of Bigger Down Payment

Monthly payment ↓ / Total cost ↓

Effect of Lower APR

Monthly payment ↓ / Total cost ↓

Effect of Longer Term

Monthly payment ↓ / Total cost ↑

Paying More Than Minimum

Loan ends faster + less interest.

Why Choose Higher Monthly Payment?

Pay off sooner + save interest.

Payday Lender Marketing Tricks

Instant approval & quick cash.

Average APR of Payday Loan

400%.

True Payday Loan Statement

Creates cycles of debt due to fees + high interest.

Need Payday Lenders Fill

Emergency short-term cash when people lack other options.

Income Volatility Effect

People with unstable income rely on payday loans more.

Why Borrowers Focus on Monthly Payment

It feels affordable; hides true cost.

How Lenders Benefit From This

They can charge more interest over longer terms.

Most Profitable Loans in Shady Sam

Longest terms + highest interest.

Loan That Kept Borrowers Coming Back

Extensions / rollover payday loans.

Risk of Adjustable-Rate Mortgage

Payment can increase suddenly.

Takeaways From Shady Sam

Watch interest rates, avoid long terms, don't fall for low monthly payment tricks.

Institution-Based Alternatives Difficulty

Need credit, bank account, documentation.

Pros of Asking Family/Friends

No interest; flexible.

Cons of Asking Family/Friends

Awkward; strains relationships.

Good Debt

Builds value long term (education, mortgage).

Bad Debt

High interest, depreciating items (cars, credit cards).

Is Financing a Car Always Bad?

No — necessary for transportation, manageable if payments fit budget.

Recommended Credit Utilization

Under 30%.

Using a Card When Emotional

Leads to overspending and regret.

Friend Paying Rent With a Credit Card

Usually bad — processing fees + interest not worth the rewards.