Based on the details of each loan, which factor has the greatest impact on reducing the total repayment? Loan #1: $2,000, 3 years, a

Question

Based on the details of each loan, which factor has the greatest impact on reducing the total repayment?
Loan #1: $2,000, 3 years, at 10% → $64.53 monthly payment
●Loan #2: $2,000, 3 years, at 15% → $69.33 monthly payment
●Loan #3: $2,000, 5 years, at 10% → $42.49 monthly payment
A) longer loan period
B) lower interest rate
C) shorter loan period
D) higher interest rate

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Answers ( No )

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    2021-09-15T01:17:27+00:00

    Answer:

    Given the amount of each loan payment over time and based on interest rate, the greatest impact on reducing the total repayment is ‘C’ shorter loan period.  

    Step-by-step explanation:

    Taking into account the amount of the loan is the same for each payment plan, $2000, we then need to look at the total amount that will be paid after all of the payments have been made.  For Loan #1, after 3 years (36 months) the total repayment is $2323.08.  For Loan #2, after 3 years (36 months) the total repayment is $2495.88.  For Loan #3, after 5 years (60 months) the total repayment is $2549.40.  The difference between Loan #1 and #2 is $179.80 and the difference between Loan #1 and #3 is $226.32.  So, you would save more money be paying off the loan sooner rather than at a lower interest rate.  

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