Question

Your purchase costs, $5,200, including tax. You sign an installment loan for $2,200 after the down payment. The remainder including the finance charge will be paid in 22 equal monthly installments of $114.66 at 16% interest. What is the new balance after one month?

Answer 1

The amount of the loan after the down payment is:

$5,200 - $2,200 = $3,000

The total amount to be paid back at 16% interest over 22 months is:

$114.66 * 22 = $2,522.52

The finance charge, therefore, is:

$2,522.52 - $3,000 = $477.48

The balance after one month is calculated as follows:

Starting balance = $3,000
Monthly interest rate = 16% / 12 = 1.33%
Interest charged in one month = $3,000 * 1.33% = $39.90
Monthly payment = $114.66
Amount paid towards principal = $114.66 - $39.90 = $74.76
New balance = $3,000 - $74.76 = $2,925.24

Therefore, the new balance after one month is $2,925.24.