Question

The problem: Monica's current debt consists of three types of loans: a bank card, an auto loan, and a department store card. She owes a total of $25,000 and her monthly payments sum to $549.61. The amount she owes, the monthly payment, and the interest rates appear in the table below: Loan Type Bank Card Auto Loan Department Store Card TOTALS Loan Amount Annual Percentage rate, APR (Current Debt) Monthly Payment 18% $12,000 $243.85 5.5% $11,500 $257.88 15% R $ 1,500 $ 47.88 $25,000 $549.61 Monica is having a hard time meeting the monthly payments and is considering consolidating the three loans to reduce her total monthly payments. She could borrow $25,000 to pay off her existing three loans leaving her with a single loan payment to the loan company. She has received a mail offer advertising a $25,000 home equity line of credit based on 7.9% APR amortized over a 10 year term with monthly payments of $164.58. (This reduces Monica's monthly payments by $385.03.)

Answer 1

4	Total Payment to Loan Company	=Total Interest + Principal
	Interest	=164.58*12*10
	Interest	19749.6
	Principal	25000
	Total Payment	44749.6
5	Calculation of No. of Months
		Bank Card	Auto Loan	Dep. Store card
	I% (p.m)	1.5	0.458333333	1.25
	PV	12000	11500	1500
	PMT	243.85	257.88	47.88
	FV	0	0	0
	Months	90.00	50.00	40.00
	Formula used in Excel	NPER(1.5%,-243.85,12000,0,0)	NPER(0.45%,-257.88,11500,0,0)	NPER(1.25%,-47.88,1500,0,0)
6	Grand Total paid:
	Loan Type	APR	Loan Amount	Monthly Payment	No. of months	Amount paid
	Bank Card	18	12000	243.85	90.00	21947.18
	Auto Loan	5.5	11500	257.88	50.00	12894.24
	Dep. Store card	15	1500	47.88	40.00	1915.31
						36756.73
7	Monica is advised to pay as per existing loans as total payment is $36756.73 , whereas if she consolidates the loans, Total payment increases to $44749.6