MM255_2___Calculating_Interest_on_Loans.docx(1) MM255M2 Calculating Interest on Loans, a

MM255_2___Calculating_Interest_on_Loans.docx(1)  MM255M2  Calculating Interest on Loans, and the Effects of Credit in Loan Qualification  Department of Business, Purdue Global University MM255M2 Interest and Loan Concepts and Calculations   My growing business needed a new car, and Ive made the following purchase using a closed-end credit installment loan based on my credit score:  I bought a car that was listed at  $23,500, and financed the sale price plus the taxes, which came to a total of $25,145. I placed  $1200 down to lower my total financed price to $23,945 (cash price + tax – down payment) and will pay $551.44 per month for 48 months.  To find my total installment price, which is the total amount paid for a purchase, including all payments, the finance charges, and the down  payment (Noble et al, 2013), I found my total of installment payments (544.44 x 48=$26,469.12) and added my down payment ($1200) to reach a total of $27,669.12. Then, I calculated the finance charges over the life of the loan to see how much more Id be paying over the original price of the car (the cost of the loan).  To calculate this, I subtracted the cash price that I financed (Sale price+tax-down payment), which was $23,945 from the installment price ($27,669.12) and was able to find that over the course of the loan, my finance charges would be an additional $3,724.12.  When weighing my options of how I was pay for the car, I needed to consider my business cash flow, and whether financing the car over time would be better for my business.