Question

You want to borrow $50,000 in order to buy a car, and th e loan is offered to you with the same interest rate whether you select a 60-month loan or a 72- ? month loan. From a strictly monetary point of view, list at least one advantage and one disadvan tage to each loan. (Note: You were purposely not given an interest rate...you do not need one to solve this problem. If it helps you illustrate your point, you may use one to your liking.)

Answer 1

Explanation:

60 month loan

Advantages: lower total finance charge, quicker payoff

Disadvantage: higher monthly payment

72 month loan

Advantage: lower monthly payment

Disadvantages: higher total finance charge, longer payment period, car may be nearing its end-of-life before the loan is paid off