QoD: What is the interest rate differential on car loans between those with bad credit and those with best credit?
Answer: 4.4% vs. 16.7% (12.3% difference)
Note: APR = Annual Percentage Rate (a.k.a. Interest Rate)
Source: MyFICO Loan Savings Calculator as of 1/31/2020 (From NGPF Activity: Impact of Credit Score on Loans)
- Why do you think that those who struggle with managing credit pay higher interest rates when they need a loan?
- Looking at the column, TOTAL Interest Paid, how much more is someone with a 580 credit score paying in interest compared to someone with a 720 credit score? [Based on $20,000 car loan]
- Between what FICO Score bands do you see the biggest difference in APR (or interest rate)?
Teachers tell us these are their two favorite NGPF Activities for Managing Credit
Don't forget Shady Sam in the NGPF Arcade to help your students understand how the "tricks of the trade" when it comes to credit as they play loan shark.
About the Author
Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.
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