Enrique has a 60-month fixed installment loan, with a monthly payment of $50.69. The amount he borrows was $2500. Instead of making his 36th payment, he is paying the remaining balance on the loan. How much interest will he save?
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Have you considered calculating the pieces?
Balance at Inception: $2,500.00
1st Payment Due in One Month.
Total Payable: 60 * $50.69 = $3,041.40
Effective Monthly Interest Rate: 0.66659811% (8% Nominal Annual) <== This is the ONLY hard part. Use a calculator.
Total Interest: $3,041.40 - $2,500.00 = $541.40
Okay, how does it look like at the time the 36th payment is due?
Balance at Due Date of 36th Payment: ??1
Payment #36 Due Immediately. <== This is a very important point.
Total Payable: (60-35) * $50.69 = ??2
Total Interest: ??2 - ??1 = ??3
The most difficult aspect of this problem might be simply keeping track of the pieces. Feel free to WRITE THEM DOWN in an organized fashion - such a that shone above.
