Question

You currently have a​ one-year-old loan outstanding on your car. you make monthly payments of $ 400$400. you have just made a payment. the loan has four years to go​ (i.e., it had an original term of five​ years). show the timeline from your perspective. how would the timeline differ if you created it from the​ bank's perspective?

Answer 1

If I have a one year loan outstanding on my car and make monthly $400 payments, my timeline would include twelve equal payments of $400 starting now. The bank's timeline would be the same twelve equal installments of $400 but they would be cash inflows since I am paying the money to the bank. I would consider the $400 a cash outflow.