Final answer:
Longer repayment periods generally increase the total cost of a loan because interest accrues over a more extended period, while shorter periods have the opposite effect. The borrower's financial health and interest rate trends can influence the value of the loan but do not alter the relationship between repayment length and the loan's total cost.
Step-by-step explanation:
The impact of the loan repayment period on the total cost of the loan is significant and understanding this impact is key in financial decision-making. Generally, longer repayment periods lead to an increase in the total cost of the loan due to the accumulation of interest over an extended time. Conversely, shorter repayment periods can decrease the total cost of the loan by reducing the time interest accrues.
Using the provided chart and considering how interest rates and the borrower's creditworthiness affect loan value, one can infer that when interest rates rise, the value of existing loans at lower rates might decrease, and if a borrower has a history of high profits, they appear more trustworthy, potentially increasing the value of their loan. The relationship between repayment periods and total loan cost, however, remains unaffected by these factors. A practical example could be the case of a college student loan: By choosing a longer repayment plan, the student may experience more ease of mind but will likely face a higher total repayment sum due to extended interest accumulation.