Chapter 8 Loans
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Strategy
Use the formulas:
loan fee = loan amount × fee rate
payback amount = loan amount + loan fee
Solution
Step 1: Convert the loan percentage to a decimal by moving the decimal two
places to the left.
20% → 0.20
Step 2: Determine the loan amount. Multiply the value of the car by the loan
percentage.
loan amount = value of car × loan percentage
loan amount = $4,300 × 0.20
loan amount = $860
Step 3: Convert the fee rate to a decimal by moving the decimal two places to
the left.
28% → 0.28
Step 4: Determine the loan fee. Multiply the loan amount by the fee rate.
loan fee = loan amount × fee rate
loan fee = $860 × 0.28
loan fee = $240.80
Step 5: Determine the full loan payback amount. Add the loan amount to the
loan fee.
payback amount = loan amount + loan fee
payback amount = $860 + $240.80
payback amount = $1,100.80
Check It
Maya is trying to decide if she wants to get a title loan on her car that is
worth $3,500. Loans-R-Us off ers title loans. They will lend up to 20% of the value
of a vehicle for a 30-day loan term. Loans-R-Us charges a fee of 24% of the loan
amount. If she decides to get the full amount of the loan, how much would Maya
have to pay back at the end of the 30 days?
Pawnshop Loans
Pawnshops are businesses that off er loans requiring personal property
as collateral. An individual with something of value can go to a pawnshop and
borrow money after handing over possession of the item to the shop. Interest