Financial Algebra CONSUMER CREDIT

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What is APR (Annual Percentage Rate)?

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APR is the annual rate charged for borrowing or earned through an investment, expressed as a percentage. It includes any fees or additional costs associated with the loan.

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How do you calculate the APR for a payday loan?

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To calculate the APR for a payday loan, use the formula: APR = (Interest / Loan Amount) * (365 / Loan Term in Days) * 100.

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What is a down payment?

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A down payment is an initial upfront payment made when purchasing a large item, typically expressed as a percentage of the total purchase price.

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How do you determine the length of a loan based on monthly payments?

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To determine the length of a loan, you can use the formula: Loan Length = Total Loan Amount / Monthly Payment.

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What is an installment plan?

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An installment plan is a payment method where the total cost of a purchase is divided into smaller, regular payments over a specified period.

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How do you calculate the total amount of monthly payments for a loan?

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Total Monthly Payments = Monthly Payment Amount * Number of Payments.

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What is the finance charge on a loan?

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The finance charge is the total cost of borrowing, including interest and any additional fees, expressed as a dollar amount.

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What is the formula for calculating simple interest?

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The formula for calculating simple interest is I = P * r * t, where I is interest, P is principal, r is the rate of interest, and t is time in years.

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What does it mean to amortize a loan?

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To amortize a loan means to gradually pay off the loan amount through regular payments that cover both principal and interest.

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What is the significance of the monthly payment in a loan agreement?

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The monthly payment is the amount the borrower must pay each month to repay the loan, including both principal and interest.