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How much money will a borrower using Loan 2 pay in interest over the life of the loan?

\begin{tabular}{|l|r|r|}
\hline & \multicolumn{1}{|c|}{ Loan 1 } & \multicolumn{1}{|c|}{ Loan 2 } \\
\hline Principal & \multicolumn{1}{|c|}{[tex]$\$[/tex] 5100.00[tex]$} & $[/tex]\[tex]$ 5100.00$[/tex] \\
\hline Monthly Payment & [tex]$\$[/tex] 152.00[tex]$ & $[/tex]\[tex]$ 120.00$[/tex] \\
\hline Duration & 36 months & 48 months \\
\hline
\end{tabular}


Sagot :

To determine how much money a borrower using Loan 2 will pay in interest over the life of the loan, we need to follow a series of steps to calculate the total interest paid.

1. Identify the Principal Amount:
The principal amount for Loan 2 is [tex]$5100.00. 2. Identify the Monthly Payment: The monthly payment for Loan 2 is $[/tex]120.00.

3. Identify the Duration in Months:
The duration of Loan 2 is 48 months.

4. Calculate the Total Payment Over the Life of the Loan:
To find the total amount paid over the life of the loan, we multiply the monthly payment by the duration in months:
[tex]\[ \text{Total payment} = \text{Monthly payment} \times \text{Duration in months} \][/tex]
Substituting in the given values:
[tex]\[ \text{Total payment} = 120.00 \times 48 = 5760.00 \][/tex]

5. Calculate the Total Interest Paid:
The total interest paid is the difference between the total payment over the life of the loan and the principal amount. So, we subtract the principal from the total payment:
[tex]\[ \text{Total interest} = \text{Total payment} - \text{Principal} \][/tex]
Substituting in the given values:
[tex]\[ \text{Total interest} = 5760.00 - 5100.00 = 660.00 \][/tex]

Therefore, the borrower will pay $660.00 in interest over the life of Loan 2.
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