Study Guide - Inst. Loans, Monthly pay, and Length of Loan

Front

What is an installment plan?

Back

An installment plan is a payment method that allows a buyer to pay for a product or service in smaller, regular payments over a specified period, rather than paying the full amount upfront.

Front

How do you calculate the amount left to be financed after a down payment?

Back

To calculate the amount left to be financed, subtract the down payment from the total cost of the item. Formula: Amount Financed = Total Cost - Down Payment.

Front

If a computer costs $1,500 and a buyer makes a $200 down payment, how much is left to finance?

Back

$1,300

Front

What is a down payment?

Back

A down payment is an initial upfront payment made when purchasing a costly item, which reduces the amount that needs to be financed.

Front

How do you calculate a percentage down payment?

Back

To calculate a percentage down payment, multiply the total cost of the item by the percentage rate (as a decimal). Formula: Down Payment = Total Cost x Percentage.

Front

If a television costs $767 and the down payment is 20%, what is the down payment amount?

Back

$153.40

Front

What is the total cost of an item purchased on an installment plan?

Back

The total cost includes the initial price of the item plus any interest or fees incurred during the financing period.

Front

If a bicycle costs $2,500 with a 10% down payment and 18 monthly payments of $135.75, what is the total cost?

Back

$2,693.50

Front

How does the length of a loan affect monthly payments?

Back

The longer the length of the loan, the lower the monthly payment will be, but the total interest paid over the life of the loan will be higher.

Front

What happens to monthly payments as the loan term decreases?

Back

As the loan term decreases, the monthly payments increase, but the total interest paid over the life of the loan decreases.