Installment Loans
Open Ended – Can
make variable
payments each month –
Like Visa
Fixed Installment –
Pay a fixed amount of
money for a set number
of payments – Like car
payments
APR – Annual Percentage Rate – The true interest charged (use table page 623)
Finance Charge – Total amount of money the borrower must pay for its use – Do not include the cash price
Finance Charge = Total Installment Price – Cash price
Total Installment Price – The down payment plus the total of all the monthly payments
Fixed Installment Loan
amount financed
Total Finance Charge = × finance charge per $100 ( see table)
100
amount financed + Total finance charge
Monthly Payment =
number of payments
Determine the APR given the price, down payment, amount of payment and, the number of payments.
First find the Finance Charge per $100 Financed
Total Installment Price = down payment + number of payments × payment amount
Finance Charge = total installment price − cash price
finance ch arg e
Finance Charge per $100 Financed = × 100
amount financed
In the number of payments row, find the closest number to the “Finance Charge per $100 Financed”.
Look above in the table to find the APR.