A few days ago

How to figure out the down payment?*more info inside*?

In my Math For Daily Living Living class, we have to answer this question.

Used boat loan for $12000.

Down payment of 25 percent.

A 14 percent APR for 36 months(which is 3.42 according to our text).

1) What is the down payment?

2) What is the amount of the loan?

3) What are the monthly payments?

4) What is the finance charge?

I just want to see if I did this right. I got my answers. But I want to see if I’m doing it right before I continue.

Top 1 Answers
A few days ago

Favorite Answer

1. 25%, or .25 times $12000 is $3000. So far, so good.

2. Here’s where it gets tricky. You have to subtract the down payment from the total price to get the amount of the loan. You only get a loan for the amount you haven’t paid yet, so you only need $9000 more for the loan.

3. The interest equals the rate of interest times the length of the loan, or i = prt (interest = principal x rate x time). The principal, or the amount of the loan, is $9000. The rate is 14%. Forget the apr; it has no bearing on this equation. The time is 3 years (36 months divided by 12 months in a year). Therefor, the interest on this loan will be 9000 x .14 x 3, or $3780.

3. If you add the amount of the loan and the interest, then divide by 36 you end up with payments of $355 per month.

4. A finance charge is whatever the traffic will bear. If your lending institution is charging you interest and a finance charge on top of that, find another lender. You’re getting rooked, big time. Besides, if you’re paying 14% on a boat loan, you must be dealing with a loan shark. The going rate today is 6.5% or less.