Heather has $13,000 to put down on a new car priced at $25,000. The bank offers an annual interest rate of 5.5% compounded quarterly for 2 years. (a) How much money does Heather need to borrow? Heather needs to borrow $ ____    . (b) What are her payments? Heather's payments are $ _____ per quarter. (c) Make an amortization table for her payments. End of Period Interest Charged Payment Payment towards Principal Outstanding Principal 0 -- -- --   1         2         3         4         5         6         7         8

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Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.