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12 November, 10:34

Joseph buys a Hummer for $59,000, financing it with a five-year 7.60% APR loan paid monthly. He decides to pay an extra $50 per month in addition to his monthly payments. Approximately how long will he take to pay off the loan under these conditions?

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  1. 12 November, 10:36
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    57.07 months.

    Joseph must decide whether the 57th payment was $1,327, or he can pay a 58th payment of just $92.

    Explanation:

    The easiest way to calculate a monthly payment is using a payment calculator:

    principal = 59,000 n = 60 APR = 7.6%

    Monthly payments = $1,185.04

    Since Joseph will pay an extra $50 each month, his payment = $1,235.04

    By paying that extra amount Joseph will reduce his payments by almost 3 months to 57.07 months

    After the 57th payment, Joseph' balance = $91.43, so he can decide to pay a little on the 57th payment or just pay $92 next month.
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