4.2B Loans

Vocabulary Review WAGE GARNISHMENT: An involuntary assignment of wages enforced by court order to pay creditors. COLLATERAL: Security, such as a personal belonging, car or boat title, CD, or stock certificates, that insures a loan is repaid APR: The interest rate paid per year or charged per year PRINCIPAL: The amount of money that is borrowed PROMISSORY NOTE: An agreement which states the conditions of a loan; a borrower’s signature confirms a promise to pay back the loan as outlined in the agreement.

Example One Lavonda took out a $7,500 loan with an APR of 6.875% and agreed to paid it back monthly over six years. How many monthly payments did she make?

Example Two Mark bought a new car. The total amount he needs to borrow is $28,716. He plans on taking out a 4-year loan at an APR of 5.12%. What is the monthly payment?   M= p= r= t=

Example Three Find the monthly payment for a $1,000, one-year loan at an APR of 7.5%. M= p= r= t=

Example Four Jeanne has a $14,800, 3 and a half year loan with an APR of 8.56%. What is the monthly payment for this loan? M= p= r= t=

Example Five Liz found an error in the monthly payment her bank charged her for a four-year, $19,500 loan. She took the loan out at an APR of 9%. Her bank was charging her $495.26 per month. What is the correct monthly payment? M= p= r= t=

Example Six Melissa wants to check the accuracy of the finance charge on her promissory note. She has a $6,000, four- year loan at an APR of 10%. a. What is the monthly payment? b. What is the total amount of the monthly payments? c. What is the finance charge?

Example Seven Juliana is taking out an $8,700, 3 and a half-year loan with an APR of 9.31%. What will be the monthly payment for this loan?