Differentiate implicit from explicit interest and gross from pure interest?
Explicit interest is the stated interest rate.
Implicit interest is interest that is embedded in either a higher principal amount or more commonly additional fees.
For example, suppose you get a car loan with a stated interest rate of 2.9%, but you have to pay $5,000 in fees when typical fees are only $500.
2.9% is the explicit interest and the $5,500 in additional fees represents implicit interest.
Implicit interest is interest that is embedded in either a higher principal amount or more commonly additional fees.
For example, suppose you get a car loan with a stated interest rate of 2.9%, but you have to pay $5,000 in fees when typical fees are only $500.
2.9% is the explicit interest and the $5,500 in additional fees represents implicit interest.
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