Question

You decide to buy a laptop for $750. You make a down payment of $150 and the company will allow you to pay off the remainder in 12 payments over the next year at 13.5% interest with a finance charge of $25. Make a table of all payments over the next year including the initial down payment and finance charge. Show the difference between paying in cash for the laptop and this financial arrangement. Show all equations and calculations you used. Explain the benefits and downsides of financing your laptop and describe when you would advise someone to finance this kind of purchase. Upload your payment table and answers below.

Answer 1

Total amount paid over the next year including the initial down payment and finance charge = $856

The difference between paying in cash for the laptop and this financial arrangement = $106

Cost of laptop=$750

Down payment=$150

Finance charges = $25

Remaining amount =$600

Amount for 1 month including 13.5 % interest=600/12*13.5/100+600/12

                                                                       =$56.75

Total amount paid over the next year including the initial down payment and finance charge =  56.75*12+150+25 = $ 856

The difference between paying in cash for the laptop and this financial arrangement = $106

Benefits of financing laptop:

A costly laptop can be yours without having to pay in full.

Bank loans and conventional credit card services are not required.

Numerous retailers provide rewards, flexible payment plans, zero-interest rates, and other benefits.

Downsides of financing laptop:

It's dangerous to borrow money because late payments might result in fees and excessive interest rates.

A credit score may suffer if there is no interest charged.

Learn more about financing here:

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