Question

Joshua Potts owes a balance of $6,000 on one credit card that charges 19 percent interest. He can pay off the balance in 2 years with monthly payments of $303. He has an installment loan with a balance of $2,000 on which he still has 24 remaining payments of $107. He can get a home equity loan for $8,000 at 6 percent interest. He can repay the loan in 2 years with monthly payments of $355. How much will Joshua save if he takes out a home equity loan to pay off his credit and installment debt?

Answer 1

The amount that will be saved when he takes out a home equity loan will be $1320.

How to calculate the amount saved on the loan

For the first loan, the total amount that will be paid will be:

= $303 × 24

= $7272

For the second loan, the total amount that will be paid will be:

= $107 × 24

= $2568

For the third loan, the amount that will be paid will be:

= $355 × 24

= $8520

The amount paid together in loan by credit will be:

= $2568 + $7272

= $9840

Therefore, the money that's saved will be:

= $9840 - $8520

= $1320

In conclusion, the amount saved is $1320.

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