Interest and Loan Calculations Essay

Tags: sales tax financial institution financing car investment money loan

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Interest and Loan

MM255 UNIT 4 ASSIGNMENT

The price of the used car is $18,700 and the down payment amount is $2,350. This implies that the amount to be financed is $16,350, that is the price of the car less the down payment. The car is intended to be financed over a period of 36 months and the monthly instalment is $516.95 for every month. Therefore, the total instalment amounts is $18,610.20, which is obtained by (516.95 × 36). The total amount financed is the sales tax together with the instalment amounts. The sales tax is 7 percent of the price of the vehicle, which is $1,309. Therefore, the total financing amount is $19,919.20. The financing charges to be paid over the life of the loan is $3,569.20.

The main advantage of paying cash is the evasion of paying financing charges. Imperatively, when a person pays for an item, in this case a car, the only amount paid is the price of the car together with any related fees. On the other hand, financing the vehicle includes the payment of the financing charges. However, the main advantage to this approach is that a person is able to obtain the vehicle if he or she lacks finances at the moment. This can be done in monthly instalments until the total amount is fully repaid.

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In addition, by financing a vehicle a person is able to build up his or her own credit score when the vehicle is fully repaid on time. Moreover, the aspect of low interest rates will have the advantages of facing cheaper borrowing costs.

Financial lenders make use of an individual’s credit score to measure his or her financial accountability, consistency, and past. There are numerous advantages to having good credit as compared to bad credit when qualifying for a loan. To begin with, a good credit score enables an individual to be completely updates on his or her credit reports and also makes the person become qualified to obtain loans straightforwardly devoid of any difficulties. In addition, the credit score facilitates a financial institution or lender in ascertaining the credit limit that can be sanctioned and the interest rate that can be set. Therefore, it is beneficial in having a good credit score in the long-term period, especially when one is in dire need of finances. When a person has a high credit score, then he or she may qualify for lower interest rates. In the contemporary, employers have begun screening the credit scores of prospective personnel in order to perceive whether they have good or poor credit history. This is for the reason that it is deemed that.....

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References
Irby, L. (2017). 9 Benefits of Having a Good Credit Score. The Balance. Retrieved from: https://www.thebalance.com/having-good-credit-score-960528


 

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