Section 9.2 Personal Loans

The following formula is used to calculate the monthly payment on a personal loan.

In this formula, n represents the _____ .

• number of periods over which interest is calculated on the loan

• number of applicants for the loan

• number of years it will take to pay the loan back

• number of dollars the loan is for

The following formula is used to calculate the monthly payment on a personal loan.

In this formula, i represents the _____ of the loan.

• annual interest rate

• interest rate per period

• initial amount

• incident amount

What would the monthly payment be for a $5,000 loan with a 6.25% interest rate compounded monthly spread over 60 months?

• $25.31

• $97.25

• $217.00

• $320.95

What is the total finance charge for a $4,250 loan at 13.25% interest compounded monthly for 24 months?

• $25.47

• $202.55

• $611.20

• $4861.20

Determine the finance charge on an $8,000 loan with a monthly payment of $162.80 for 60 months.

• $29.47

• $162.80

• $1768.00

• $9768.00

Determine the finance charge on an $8,000 loan with a monthly payment of $162.80 for 60 months.

• $99.34

• $105.32

• $117.93

• $156.60

Tim and Sally are taking out a personal loan to pay for their wedding expenses. The loan is for $9,000 and comes with an interest rate of 9.5% compounded monthly. The couple wants to pay the loan off as quickly as possible, keeping the monthly payments below $250. The lender offers repayment plans in 12 month increments. How long of a loan should they request?

• 24 months

• 36 months

• 48 months

• 60 months

Ricky is taking out a personal loan for $12,000 to remodel his kitchen. He would like the lowest monthly payment possible, even if it means a bigger finance charge in the end. His bank has offered him a loan at 13% interest for 36 months or 12% interest for 60 months, both of which are compounded monthly. Which of the following statements most accurately describes what Ricky should be thinking?

• More payments with the 60 month loan will give him the lowest monthly payment.

• Fewer payments with the 36 month loan will give him the lowest monthly payment.

• The 60 month loan comes with a bigger finance charge and, thus, a bigger monthly payment.

• The 36 month loan comes with a bigger finance charge and, thus, a bigger monthly payment.