Suppose you have two student loans: $15,000 with an APR of 8% for 15 years $10,000 with an APR of 9.5% for 20 years
Calculate the monthly payment for each loan individually. How much do you pay each month?
How long do you have to pay that monthly amount? Over the course of each loan, how much total do you pay? How much of that is interest? How much interest will you pay in total?
You have the opportunity to consolidate these 2 loans into a single loan with an APR of 8% and a term of 12 years.
What will be your monthly payment if you consolidate? How does that payment compare with what you are paying on the two loans individually?
Does this result make sense to you? Why or why not? What will your total payments be over the life of the loan?
How much of that is interest? What are the pros and cons of doing this consolidation? You are applying for a mortgage for $150,000 to buy a house.
You shop around and find these two possible mortgage options: A 20 year mortgage loan with an APR of 6% A 30 year mortgage loan with an APR of 5% What are your monthly payments with each loan? How much will you pay over the life of each loan?
How much of that is interest? Which option would you choose? Explain your reasoning, taking into account your answers to both (1) and (2).