Personal loans

Ricky is taking out a personal loan for $12,000 to remodel his kitchen. He would like the lowest monthly payment possible, even if it means a bigger finance charge in the end. His bank has offered him a loan at 13% interest for 36 months or 12% interest for 60 months, both of which are compounded monthly. Which of the following statements most accurately describes what Ricky should be thinking

a. More payments with the 60 month loan will give him the lowest monthly payment

In a secured loan, collateral is _____.

a. valuable property that the borrower promises to give the lender in the event of default on the loan

Annie would like to take out a loan to put a new playground in her yard for her kids. She offers her car which is worth $7,800 as collateral. The loan officer at the bank is permitted to loan Annie 92% of the value of her collateral. How much will Annie be able to borrow for the playground using her car as collateral

b. $7,176.00

What would the monthly payment be for a $5,000 loan with a 6.25% interest rate compounded monthly spread over 60 months

b. $97.25

Jason used his car as collateral to borrow money from his bank. After losing his job, Jason is now unable to make his monthly payments for the loan, defaulting on the loan. If Jason is unable to continue to make his payments, what is likely to happen to his car

b. The bank will seize the car and likely sell it to pay off Jason's loan

Determine the finance charge on an $8,000 loan with a monthly payment of $162.80 for 60 months

c. $1,768.00

Susan took out a personal loan for $3,500 at an interest rate of 13% compounded monthly. She made arrangements to pay the loan off in 3 years. What will her monthly payment be?

c. $117.93

Tom would like to take out a secured loan to help pay for a vacation this summer. He has offered his car as collateral. His car is worth $3,500. His bank can offer loans for 80% of collateral value. The vacation he has planned will cost $4,750. Approximately how much additional collateral will Tom need to offer in order to borrow enough to go on his vacation as planned

c. $2,437.50

Tim and Sally are taking out a personal loan to pay for their wedding expenses. The loan is for $9,000 and comes with an interest rate of 9.5% compounded monthly. The couple wants to pay the loan off as quickly as possible, keeping the monthly payments below $250. The lender offers repayment plans in 12 month increments. How long of a loan should they request

c. 48 months

Sam needs to take out a personal loan for $8,900 to pay for a trip to Europe with his classmates. His bank has offered him the four loans listed in the chart below. If all of the loans are compounded monthly, which of the four loans will give Sam the lowest monthly payment? Loan Duration (Months) Interest Rate A 12 9.50% B 24 8.75% C 36 7.75% D 48 6.60%

d. loan D