Question

Tanya is considering obtaining a loan. Which benefit will Tanya receive if she makes a down payment when she obtains the loan?

Answer 1

Answer:

E.  lower principal amount​

Step-by-step explanation:

We can use an example to show how this works:

You want to buy a car and it costs $20,000. The loan lasts 5 years (60 monthly payments) and the interest rate is 10%.

If you do not make any down payment, your initial principal will be $20,000, and your monthly payment will be $424.94, your total payments = $25,496.45 and the total interests = $5,496.45.

Instead, if you make a 20% down payment, your initial principal = $16,000,  and your monthly payment will be $339.95, your total payments = $20,397.16  and the total interests = $4,397.16.