Question

Erin borrowed $18,000 to buy a car. Her loan will be paid off in 5 years. By the time that she pays off the loan, she will have made $20,327 in payments. Why did she have to pay $2,327 more than the price of the car?

Answer 1

She had to pay interest of $2,327 for the privilege of borrowing the principal of $18,000.

Step-by-step explanation:

Banks make money by charging interest on loans.

Answer 2

Interest rates and fees.

Interest is the amount that you pay to borrow money.