To determine how much money a borrower using Loan 2 will pay in interest over the life of the loan, we need to follow a series of steps to calculate the total interest paid.
1. Identify the Principal Amount:
The principal amount for Loan 2 is [tex]$5100.00.
2. Identify the Monthly Payment:
The monthly payment for Loan 2 is $[/tex]120.00.
3. Identify the Duration in Months:
The duration of Loan 2 is 48 months.
4. Calculate the Total Payment Over the Life of the Loan:
To find the total amount paid over the life of the loan, we multiply the monthly payment by the duration in months:
[tex]\[
\text{Total payment} = \text{Monthly payment} \times \text{Duration in months}
\][/tex]
Substituting in the given values:
[tex]\[
\text{Total payment} = 120.00 \times 48 = 5760.00
\][/tex]
5. Calculate the Total Interest Paid:
The total interest paid is the difference between the total payment over the life of the loan and the principal amount. So, we subtract the principal from the total payment:
[tex]\[
\text{Total interest} = \text{Total payment} - \text{Principal}
\][/tex]
Substituting in the given values:
[tex]\[
\text{Total interest} = 5760.00 - 5100.00 = 660.00
\][/tex]
Therefore, the borrower will pay $660.00 in interest over the life of Loan 2.
