We appreciate your visit to Keeping the monthly payments below 250 the lender offers repayment plans in 12 month increments How long a loan should they request A 24 months. This page offers clear insights and highlights the essential aspects of the topic. Our goal is to provide a helpful and engaging learning experience. Explore the content and find the answers you need!
Answer :
Final answer:
To keep monthly payments below [tex]$250, the best loan term option is 60 months, as this will result in lower monthly payments compared to shorter loan durations. Choosing a longer term helps dilute the cost over more months. Thus, 60 months is the most suitable choice provided.
Explanation:
Choosing the Right Loan Repayment Plan
When considering how long a loan should be taken out to keep monthly payments below $[/tex]250, it's important to look at how the terms of the loan directly affect your payment amount. The monthly payment is determined by the loan's principal amount, the interest rate, and the duration of the loan.
Loan Payment Formula
The formula to calculate the monthly payment (M) is as follows:
M = P[r(1 + r)^n] / [(1 + r)^n – 1]
Where:
- P = principal loan amount
- r = monthly interest rate (annual interest rate / 12)
- n = number of payments (loan term in months)
In this scenario, if you set the maximum allowable payment M to be [tex]$250, you can substitute the values of n to determine the longest loan term possible.
Analysis of Loan Terms
- For 24 months: You could expect higher payments.
- For 36 months: Payments would still be significant.
- For 48 months: Payments would be lower, but may still exceed $[/tex]250.
- For 60 months: Payments would likely drop below [tex]$250.
As the number of months increases, the monthly payment decreases. Therefore, if keeping payments under $[/tex]250 is the goal, the best fit from the options provided is 60 months. This would spread the payments over a longer period, reducing the monthly obligation.
Learn more about Loan Repayment Plans here:
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