Final answer:
The Truth in Lending Act (TILA) regulates credit transactions that are repayable in more than four installments. Monthly payment calculations and the impact of increased payments on the overall interest and length of the loan are addressed, using examples of a $300,000 mortgage and a $20,000 car loan.
Step-by-step explanation:
The Truth in Lending Act (TILA) applies to credit transactions, including mortgages, that are payable by agreement in more than four installments. TILA does not cover loans or credit extended for business or commercial purposes.
For a $300,000 loan with a 6% interest rate convertible monthly over 30 years, the monthly payments can be calculated using the formula for the present value of an annuity. If a borrower decides to make the equivalent of 13 monthly payments per year instead of 12, they will save on both the total interest paid and the time it takes to pay off the loan.
For a $20,000 car loan at a 6% annual interest rate convertible monthly, the length of time it will take to pay off the loan with monthly installments significantly depends on the payment amount. Monthly installments of $500 will pay off the loan quicker compared to installments of $100.