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You take out a loan for $19,000 with an interest rate of 5.25% annually. You pay $325 monthly. How long will it take to pay back the entire loan?

A. 6 years
B. 7 years
C. 8 years
D. 9 years

User Topofsteel
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1 Answer

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Final answer:

It will take approximately 4.87 years to pay back the entire loan.

Step-by-step explanation:

we would need to use the amortization formula or a financial calculator because this involves a complex computation where the balance decreases with each payment as part of each payment goes toward both the principal and the interest. To solve this, we can use financial functions in a spreadsheet or an online loan calculator providing the necessary variables: principal amount, annual interest rate, and monthly payment amount. This will give us the number of months needed to repay the loan in full.

To find out how long it will take to pay back the entire loan, we need to divide the total loan amount by the monthly payment. In this case, the loan amount is $19,000 and the monthly payment is $325. So, the number of months it will take to pay back the loan is:

$19,000 / $325 = 58.46 months

Since we are looking for the number of years, we can divide 58.46 by 12 to convert it to years:

58.46 / 12 = 4.87 years

So, it will take approximately 4.87 years to pay back the entire loan.

User Jakebman
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