CREDIT

Loans$$$ ….Repay with Interest

+

Borrow $2000

Repay $100 per month for 2 years

How Much do you Pay??

$2000 Borrowed $2400 Repaid

$100 x 24

Interest Paid = $400

Simple Interest & Flat Rate Loans

Use the Formula I = PRN

Amount of Simple Interest

The Principal $$

Borrowed

The Interest Rate

per annum (year)

The Number of

Years to PayBack

How Much Interest ?…you Borrow $2000 (P)

…Interest Rate 10% pa (R)

…Repay in 2 Years (N)

Use the Formula : I = PRN

Substitute the Values : I = 2000 x 0.10 x 2

Calculate: I = $400

*How Much Would You Have to Repay?

Borrowed + Interest=$2400

*What Would be the Monthly Repayments?

Total$ to pay / 24=$2400/24 mths=$100 per month

Using I = PRN to find the Interest Rate

Cash Price = $400

OR

On Terms: $40 Deposit& $20 per month for 2 years

How Much Do I Pay??

How Much Interest??

What % Rate Is That??

PAY $40 + $20 x 24 mths = $520

Interest Paid = Extra over the Cash Price = $120

Use I = PRN

120 = 360 x R x 2

R=0.167

R=16.7%

Balance =$400-$40=$360

Using A Repayments TableDo You Take the Terms at the Shop, OR

Is it Cheaper to Get a Loan Elsewhere ,

and Pay Cash?….YOU CHOOSE!Cash Price $600

On Terms :

Pay $32 per month for 2 years

Bank Loan for $600

How Much would you have to pay ?

Check the Bank’s Table

How Much Cheaper

Would the Bank Loan Be??

Pay$660 to Bank

or $768 to Shop (Terms)

Amount I Year 2 Years

$300 $27.50 $15.00

$600 $55.00 $30.00

$800 $73.33 $40.00

pa

pa

pa

interest interest

Home Loans Repayment TableLarge Loans to buy a House

use a Different Type of Interest, REDUCIBLEThe Table gives the Monthly Repayment for EACH $1000 Borrowed

You Borrow $800 000….What are the Monthly Repayments?

If the Interest Rate is 6% p.a. and you want 20 years to repay

You Pay $7.16 per month , for each $1000

For $800000 that’s $7.16 x 800 = $5728 p.m.

That’s a Total of $5728 x 240 = $1374720

Home Loans Repayment TableSelect the Interest Ratete %Select the Years to RepayUsing Monthly Repayments

The Monthly Repaymentsents per $1000interest % 10 20 30 years r r n̂

5 10.61 6.60 5.37 1.00 1.00 1.00 1.65 2.71 4.476 11.10 7.16 6.00 1.01 1.01 1.01 1.82 3.31 6.027 11.61 7.75 6.65 1.01 1.01 1.01 2.01 4.04 8.128 12.13 8.36 7.34 1.01 1.01 1.01 2.22 4.93 10.94

INTEREST…reducible or flat??

Home Loans use REDUCIBLE Interest.

The Interest Reduces as the Amount owed gets Smaller

FLAT INTEREST REDUCIBLE INTEREST

You Borrow $3000.

You Pay Back $1000 each Year + Interest.

Over 3 Years, How Much is Repaid??

YR 1 YR 2 YR 3

OWE $3000 $2000 $1000

INT $3000 $300 $300

PAY $1300 $1300 $1300

YR 1 YR 2 YR 3

OWE $3000 $2000 $1000

INT $3000 $200 $100

PAY $1300 $1200 $1100

*The Interest is calculated on how much is still Owed

Do Your Own !!

Home Loan Repayment TableBorrowed $20000.

Interest Rate 1% per month.

Repay $500 per month.

Each Month find …

the Interest on what’s owed…

the Total Amount Owed with the Interest added…

then what’s left Owing after the monthly Repayment

Month Principal Interest P + I LeftOwing

1 $20000 $200 $20200 $19700

2 $19700 $197 $19897 $19397

3

1.At the start you Owe2.Interest at end of month 1%

3.The Interest added to Principal4.Then Repayment is subtracted($500)

At the end of each month, the Amount Left Owing

is Carried Over to the Start of the Next Month

Find the

Amounts for

Month 3