Jessica just graduated from college with a degree in philosophy and has landed herself a great job – at McDonald’s. Now it’s time for her to begin paying back her college loan. For the next 12 years she will be making a monthly loan payment of $232.40. The loan has an APR of 4.75%. What was the amount of Jessica’s college loan? How much interest will Jessica have paid by the end of the loan?

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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.