Question

Xavier Martinez took out a $5,000 loan at 7.5% interest for reconstructing his patio. His monthly payment on the 12-month loan was $437.26. After 6 payments, the balance was $2,556.03. He paid off the loan with the next payment. What did he save by paying off the loan early?

A.) $51.55
B.) $15.98
C.) $67.53
D.) $42.74

Answer 1

Paying off the entire loan = 12 * 437.26 = 5,247.12
He paid 6 * 437.26 = 2,623.56
He then paid 2,556.03

2,623.56 plus = 2,556.03 = 5,179.59

5,247.12 minus 5,179.59 =
67.53 the amount of money he saved.

Answer 2

Answer: C. $67.53

Explanation:

Here the total amount of the loan = $ 5000

Interest rate = 7.5%

His monthly payment = $437.26

Since, if he pay off the loan in 12 months,

Then his total payment =
`12* 437.26 = 5247.12`

And, if he pay off the loan in 7 month,

In which his total payment in 6 months =
`437.26* 6= 2623.56`

His payment in 7 month = $2556.03

Thus, the total payment he did =2623.56 + 2556.03 = $5179.59

Thus, his total saving = 5247.12 - 5179 = $67.53

Therefore, Option C is correct.