1. Allocation of Installment Loans
Lesson 5.3

2. Simple Interest Installment Loans

3. For a Simple interest installment loans a finance charge will be added on to the loan for the use of the money.
The annual percentage rate (APR) is the relative costs of borrowing money. We will be using a table to use the APR.

4. Formulas…
Monthly payment for a $100 Loan
Monthly Payment
Amount = *
$100
Total Amount Repaid
Number of Payments
Monthly Payments = *
Total Amount Repaid
Finance Charge
Amount Financed = -

5. Henry Hart obtained an installment loan of $2,250
Henry Hart obtained an installment loan of $2, to purchase new Business Law books. The annual percentage rate is 8%. The loan must be repaid in 18 months. What is the finance charge?

6. Stan was purchasing a washer and dryer with an installment loan that has an APR of 12%. The washer and dryer sells for $1, The store requires a 10% down payment and 12 monthly payments. Find the finance charge.

7. Installment Loans-Allocation of Monthly Payment
5.3b

8. A repayment schedule described the distribution of interest and principal over the entire length of the loan.

9. I=P R T Formulas… Payment on Principal Monthly Payment - Interest =
New Principal
Previous Principal = -

10. Dr. Best got a loan for $2,500.00 at 9% for 6 months.
Find the monthly payment.
Find the interest for the first payment.

11. Dr. Best got a loan for $2,500. 00 at 8% for 6 months
Dr. Best got a loan for $2, at 8% for 6 months. Fill in the repayment schedule.
Repayment Schedule
Payment Number
Monthly Payment
Amount for Interest
Amount for Principal
Balance 1 2 3 4 5 6
$2,500
$427.75
$18.75
$409.00 $
$427.75
$15.68
$412.07 $
$427.75
$12.59
$415.16 $
$427.75
$9.48
$418.27
$845.50
$427.75
$6.34
$421.41
$424.09
$427.75
$3.18
$424.57
-$0.48
Final payment; $427.27

12. Lesson 5.3: Allocation of Installment Loans
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