Loans

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What is a loan?

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A loan is a sum of money borrowed from a lender that is expected to be paid back with interest over a specified period.

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CCSS.5.NF.B.5B

CCSS.4.NF.A.1

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What does APR stand for?

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APR stands for Annual Percentage Rate, which is the annual rate charged for borrowing or earned through an investment.

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CCSS.7.RP.A.3

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How do you calculate monthly loan payments?

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Monthly loan payments can be calculated using the formula: M = P[r(1 + r)^n] / [(1 + r)^n – 1], where M is the total monthly payment, P is the loan principal, r is the monthly interest rate, and n is the number of payments.

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CCSS.8.EE.C.7B

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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 big-ticket item, typically expressed as a percentage of the total purchase price.

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CCSS.6.RP.A.3C

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What is a finance charge?

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A finance charge is the cost of borrowing money, which includes interest and any additional fees associated with the loan.

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CCSS.5.NBT.A.2

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How many months are in a 2½-year loan?

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A 2½-year loan consists of 30 months.

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CCSS.4.MD.A.1

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What is the significance of using available credit?

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Using available credit responsibly helps build a positive credit history, which can improve credit scores and increase borrowing capacity.

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What is the formula to calculate the total cost of a loan?

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Total cost of a loan = (Monthly payment x Number of payments) - Loan principal.

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What is the purpose of an installment plan?

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An installment plan allows a borrower to pay for a purchase over time through regular, fixed payments, making it more manageable.

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What is the impact of interest rates on loans?

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Higher interest rates increase the total cost of borrowing, resulting in higher monthly payments and overall loan costs.

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CCSS.7.RP.A.3