Question

Hilda is taking out an $11,000 personal loan that she will repay in 5 years. If she receives a 10% interest rate, her monthly payments will be $233.72. If she receives and 18% interest rate her monthly payments will be $279.33. How much less interest will Hilda pay if she qualifies for the lower interest rate? *

Answer 1

Hilda would pay $ 2,736.60 less interest

Explanation:

The total interest payment is the total repayments for 5 years less the initial loan amount

If the interest rate is 10% Hilda repays $233.72 for 5 years multiplied by 12 months:

total repayment=$233.72*5*12=$ 14,023.20

Interest =$14,023.20-$11,000.00=$3.023.20

If the interest rate is 18% Hilda repays $279.33 for 5 years multiplied by 12 months:

total repayment=$279.33*5*12=$ 16,759.80

Interest =$16,759.80 -$11,000.00=$5759.8

Difference in interest payments=$5759.8 0-3.023.20=$ 2,736.60