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How much money will a borrower using Loan 2 pay in interest over the life of the loan?

[tex]\[
\begin{tabular}{|l|r|r|}
\hline & \multicolumn{1}{|c|}{Loan 1} & \multicolumn{1}{c|}{Loan 2} \\
\hline Principal & \$2500.00 & \$2500.00 \\
\hline Monthly Payment & \$50.00 & \$80.00 \\
\hline Duration & 60 months & 36 months \\
\hline
\end{tabular}
\][/tex]



Answer :

GinnyAnswer
To find out how much money a borrower using Loan 2 will pay in interest over the life of the loan, we need to follow these steps:

1. Identify the Principal Amount:
- For Loan 2, the principal amount is [tex]$2500.00. 2. Identify the Monthly Payment: - For Loan 2, the monthly payment is $[/tex]80.00.

3. Identify the Duration of the Loan:
- For Loan 2, the duration is 36 months.

4. Calculate the Total Amount Paid:
- The total amount paid over the life of the loan is calculated by multiplying the monthly payment by the duration of the loan.
- Total Amount Paid = Monthly Payment × Duration
- Total Amount Paid = [tex]$80.00 × 36 - Total Amount Paid = $[/tex]2880.00

5. Calculate the Interest Paid:
- The interest paid over the life of the loan is found by subtracting the principal amount from the total amount paid.
- Interest Paid = Total Amount Paid - Principal
- Interest Paid = [tex]$2880.00 - $[/tex]2500.00
- Interest Paid = [tex]$380.00 Therefore, the borrower using Loan 2 will pay $[/tex]380.00 in interest over the life of the loan.

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