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8.3 – Simple Interest Installment Loan

8.3 – Simple Interest Installment Loan. Vocabulary. simple interest installment loan (p. 290) A loan repaid with equal monthly payments. annual percentage rate (p. 290) An index showing the cost of borrowing money on a yearly basis, expressed as a percent. Steps.

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8.3 – Simple Interest Installment Loan

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  1. 8.3 – Simple Interest Installment Loan

  2. Vocabulary simple interest installment loan (p. 290) A loan repaid with equal monthly payments. annual percentage rate (p. 290) An index showing the cost of borrowing money on a yearly basis, expressed as a percent.

  3. Steps • Step One: Find the amount of loan Amount = Cash Price – Down payment • Step Two: Find the Monthly Payment Monthly Payment = (Amount of Loan ÷ $100) × Monthly Payments for a $100 Loan (see p. 799) • Step Three: Find the Total Amount Repaid Total Amount Repaid = Number of Payments × Monthly Payments • Step Four: Find the Finance Charge Finance Charge = Total Amount Repaid – Amount Financed

  4. Example • Lisa buys a new car for $19,000. She makes a down payment of 25% and finances the rest with a loan at 8% APR for 36 months. What is the Finance Charge? • Step 1: Find the Amount of Loan. • Down payment = 19,000 x .25 • Down payment = $4750 • Amount of Loan = $14,250

  5. Step Two • Step 2: Find the monthly payment Monthly Payment = (Amount of Loan ÷ $100) × Monthly Payments for a $100 Loan (see p. 799) • Amount of Loan ÷ $100 = • $14,250 ÷ 100 = $142.50 • Look at p. 799 for 8% and 36 months • From Chart: 3.13 • Monthly Payment = $142.50 x 3.13 • Monthly Payment = $446.03

  6. Steps 3 & 4 • Step 3: Find the total amount repaid Total Amount Repaid = Number of Payments × Monthly Payments • 36 x $446.03 • Total Amount Repaid = $16,057.08 • Step 4: Find the Finance Charge • $16,057.08 – $14,250 • $1807.08 = Final Answer!

  7. Assignment • P. 291-293 1-16all

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