Question

Your aunt bought a new car. After three months of car payments she owed a total of $22,275 to the bank for the car loan. After 12 months, she owed $18,900 to the bank for the car loan. What was her average payment rate on the principal of the car loan during this time?

Answer 1

You can find the rate of change by dividing the difference in the principal owed by the difference in the number of months.

18,900 – 22,275 / 12 – 3 = -375

The average payment is $375 per month.

Answer 2

Given:
Balance after 3 months = 22,275
Balance after 12 months = 18,900

$22,275 - $18,900 = $3,375

12 months - 3 months = 9 months

3,375 / 9 months = $375 per month.

375 x 12 = 4,500
4,500 + 18,900 = 23,400 principal amount.

375 / 23400 = 0.016
0.016 x 100% = 1.60%

The principal of the car loan is $23,400
The interest rate of the car loan is 1.60%
The monthly payment is $375.