### Page 23 article text (OCR)

T »• ?• r, 'r. Discount, Add-On Interest Can Effect Your Loan Rate Golesburg Register-A/oil, Golesburg, Mendoy> July 9, 1973 23 By CAHL1X)N SMITH three little words, if you understand them, can gave quite a few dollars when you go shopping for an auto loan, or money for whatever pur* pose that falls in the personal Joan category. . Penonat Finance One of the words is "discount." The other two are "add-on." They are the two methods that banks common* Jy use to figure interest charges, and one makes your lean more costly than the oth* Competitive banks in the same area will generally be talking the same rate. Of a half dozen, all sit might tell you, for example, "$5 per hundred per year" — typcical for a new car loan today. But ask, as you're phoning .around, whether the bank 'uses the discount or the add on method. If you find one using- the latter, there's going to be a dollar difference in your favor, even though stated rates are the same. THE ADD-ON method is easy enough to understand. \ou need $2,000 cash to cover the difference between your trade-in and the cost of your car. You want a two-year loan. At $5 per hundred per year, the interest on $2,000 at $100 per year comes to $200. Add that to the C$2,000, and that's the size, of your loan — the amount you sign a note for. Divide the $2,200' by 24, and, your monthly payment figures out to $9>1'67. When the discount method is used, the lender subtracts total interest charges from the amount of the loan, rather tnan adding them on. From a $2,000 loan he subtracts the 1200 for interest, and you receive $1,800 in cash. But you need $2,000 in cash. Seme arithmetic is necessary to arrive at the size of the loan; it turns out to be $2,222 22. Using the "$5 per hundred" formula on that amount, the interest comes to $222.22. The lender subtracts that, and presto! — you walk out with exactly $2,000 in cash. BUT NOT THAT where the add-on method was used, the total*; interest charge was smaller by $22.22. That's how much the one method costs you, over the other. In both cases, you're phone shopping for the best rate, (Ihe lender will first give you the true annual interest rate — as required by the Truth in Lending Law — before explaining interest cost in the more familiar terms of "$5 per hundred. That can be one indication to the bargain hunter. In the examples above, true annual rate where the add-on method is used is 9.6 per cent. For the discount method, it's 10.67 per cent. But shopping for loans is complicated, in practice, because lenders don't bother to work out the arithmetic as nicely as we did above, when the discount method is used. They'll generally look in a table, where monthly payments are all worked out, to find a figure nearest to the cash amount you want. Here, for example, are two actual quotes from banks on a request for a $2,000, two-year new car loan: Bank A: Note would be m?de for $2,232, net cash to borrower $2,011, monthly payment $93. Bank B: Note would be made for $2,280, net cash to borrower $2,052, monthly pay* ment $95. IN TRYING TO pick the better deal, the true annual interest rate might not tell you what you want to know. Because these are different deals,, since Bank B is thrusting an extra $52 upon you, Bank A an extra $11. What you're really interested in is how much comes out of your pocket. And it's always easy to figure "true dollar cost," no matter how many figures are flying around. You need to know only two things: "How much net cash do I get? What's the monthly payment?" Multiply the monthly pay ment by the number of payments, and that's your total outlay. In the case of Bank B, $95 x 24 = $2,2*0. (That's the amount of the note you sign.) Subtract your net cash —$2.052-and the difference is the interest you're paying, or true dollar cost: $228. FIGURE THE COST of Bank A's loan the same way, arid it comes out to $221. Here's where the true annual interest rate isn't of much help. The two banks offer almost identical rates, but what your interest is in is that your total outlay is $48 less if you take Bank A's deal, and the true dollar cost $7 lower. (Newspaper Enterprise Assn.) Early Retirees To Get Bonus Under New Busch Beer Pact ST. LOUIS (UPI) - Members of two unions that face fewer jobs because of automation at the World's largest brewery have ratified a contract that provides a married employe a $300 monthly bonus if he retires three years early. The unions- had staged a strike that shut down the Anheuser - Busch Inc. St. Louis plant for 10 days. Production resumed Friday after negotiators reached tentative agreement. Members of Beer Bottlers Local 187 and Lab Technicians Local 262 approved the pact Sunday on an 889-4 standing Ivote at a joint meeting. The beer bottlers have about 1,100 members and lab technicians have about 125. Although (the contract calls for hefty pay increases, the key issue that provoked the strike concerned the pension plan Even before the strike began, both sides had agreed to the hourly wage hike of $1.04 spread oyer the three-year con tract term. The old contract provided for $5.67 an hour. James Kennedy, correspond ing secretary for Local 187, said the unions agreed to the company's plans to eliminate 70 bottlers' and lab technicians' jobs through automation. Anheuser-Busch, in turn, agreed that money saved from the eliminated jobs would be put into the unions' retirement plans. Under the new early retirement plan, eligible employes can retire at age 62, at which time they draw an earfy retire ment benefit of $300 a month for married men and $225 for single men. O ON SECOND GATES TIRE! Buy one Air-Float Custom whitewall at regular price get the second at 60% saving! SAff l ^m97T (l $24.87ON TWO WHTEWALLS! TIRE SIZE FIRST TITO REGULAR PRICE SECOND TIRE M%OFP F.E.TAX MR TIRE E78-14 $29.45 $11.78 $2.22 F78-14 30.95 12.38 2.37 G78 -14 33.95 13.58 2.53 H78 -14 37.45 14.98 2.75 J78-14 38.95 15.58 2.89 560 -15 24 .95 9.98 1.74 G78-15 34.95 13.98 2.60 H78-15 37.95 15.18 2.80 L78-15 41.45 18.58 3.13 E Notrade-Insnecessary. Performance Tire Special! Gates XT RenegadeTO' SAVE$7.0O-$12.00 ATIRE! NOW ONLY! Wide70"series with unique, road'holding tread design. $»^"jyO 4-pIy polyester cord body. Raised white lettering. E70-14 F70-14 G70-14 F70-15 G70-15 H7Q-1S $31.45 32.95 36.45 33.95 37.45 40.95 $23.85 25.95 2*95 25.95 26.95 28.95 S1ZEE7G-H PLUS (2.49 f£j. No trade*ins necessary. TIRE CENTER ii SALE ENDS SATURDAY, JULY 14 Gates Tire Center Shop the Magic Mile" 1233 N. HENDERSON ST. — PH. 343-6196 Hours: Mon.-Fri. 8 AM- 5 PMj Sat. 8 AM -12 Noon We honor bank cards displaying these symbols: The Bargain Box SPECIAL! ALIGNMENT Includes High Speed Spin Balance. Tortion Bar or Air $2.00 More. Guaranteed 5,000 Miles or 6 Months. $ The Right Prescription for A SOUND FINANCIAL FUTURE IS A CONVENIENT HOME SWINGS Savings Plan THAT'S DESIGNED JUST FOR YOU ~= 10.000 or More in $100.00 Multiples 2 or 3 Year Guaranteed Return Sayings Certificates EARNS 6.50% Per Annum $ 10.000 4 or 5 Year or More in Guaranteed Return $100.00 Multiple. Sayjngs CepHf jcqtes 6.75% Per Annum $ 1000 or More in $100 Multiples 3 Month Certificate EARNS 5.75% Per Annum Accounts Automatically EARN 5.25% Per Annum DEPOSITS MADE ANYTIME IN ANY AMOUNTS • WITHDRAWALS MADE ANYTIME IN ANY AMOUNTS DEPOSITS MADE BY THE 10TH EARN FROM THE FIRST WHEN IT COMES TO SAVINGS . . . BRING YOUR SAVINGS HOME n roes AND LOAN ASSOCIATION 50 IA5T MAIN STRUT GALISBURG, ILLINOIS PHONE 342-4145