Loan Amount =

Interest/Yr =

Years =

Payment =

Total Paid =

Interest/Yr =

Years =

Payment =

Total Paid =

Compare monthly payments for two competing loans or mortgages. It is assumed that payments are made monthly and interest is compounded monthly.

- Loan Amount: amount of the loan or mortgage

First Loan:

- Interest/Year: interest rate expressed as a percentage for the first loan

- Years: number of years for the first loan

- Payment: first loan's payment

Second Loan:

- Interest/Year: interest rate expressed as a percentage for the second loan

- Years: number of years for the second loan

- Payment: second loan's payment

Two banks are offering you a loan of $25,000. The first bank is offering a 3 year, 7.5% loan while the second is offering a 5 year 6.25% loan. Which will yield the lower monthly payment? Which of the two loans is less expensive over its life?

- Loan Amount: $25,000.00

First Loan:

- Interest/Year: 7.5%

- Years: 3

Second Loan:

- Interest/Year: 6.25%

- Years: 5

Select "=" on two Payment rows. The first loan is $777.66 per month with $27,995.60 paid over the life of the loan while the second is $486.23 per month with $29,173.89 paid over the life of the loan.

The second loan is less expensive month-to-month but the first loan is less expensive over its life.

Loan Amount

Interest/Yr

Years

Payment

Total Paid

Interest/Yr

Years

Payment

Total Paid

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Mortgage

Loan