Question

Enrique has a 60-month fixed installment loan, with a monthly payment of $77.86. The amount he borrowed was $3500. Instead of making his 36th payment, Enrique is paying the remaining balance on the loan. How much interest will Enrique save (use the actuarial method)

Answer 1

Answer:

Total interest saved = $ 774.9

Explanation:

Formula for total interest saved:

Total interest save = total interest in one month + Total interest at 36th month

Calculating total interest in one month:

As Enrique has a 60-month fixed installment loan, with a monthly payment of $77.86 so

1st payment in one month = 60 × 77.86

1st payment in one month  = $4,671.6

As the amount he borrowed was $3500.

Therefore

Total interest = 4,671.6 - 3,500

Total interest = $1,171.6

Calculating total interest at 36th month:

Total interest at 36th month = ( 60 - 35 )× 77.86

Total interest at 36th month = 1,946.5

Therefore by putting the values in the above formula, we get

Total interest saved = $1,946.5- $1,1716

Total interest saved = $ 774.9