Question

Jose has decided to pay off his $20,000 car loan. He has been making payments of $444.89 and has 15 months left to pay. His loan has a 12% interest rate and is to be paid off in 5 years. How much will he need to make his payment to fully pay off the car?

Answer 1

6,168.35

Explanation:

Periodic interest rate 12%/12 = 1%

h = (5x12) - 15 = 45

The prepayment formula gives

$20,000(1+0.01)^45 + (1-(1+0.0)^45/0.01) = 6,168.35

Answer 2

The total amount of loan payable in 5 years = amortization *60
where:
monthly amortization = $444.89
Total amount of car loan = $26263.4
Remaining balance =15 months x monthly amortization
Remaining car loan balance = $6673.35
Jose needed an amount of $6673.35 to fully pay his five-year car loan.