Problem: A salary loan amounting to P15,000 is to be paid annually for 4 years with an interest rate of 6% compounded annually. The annual amortization is P P4,328.87. Interest Payment (R) Component of Component of Payment Outstanding Balance Period Regular PRINCIPAL Payment PI1,571.13 7,936.53 E P900 P3,428.87 P4,328.87 P4,328.87 P4,328.87 P694.27 D. 3,852.68 245.031 4,083.84 1. Total G H. Guide Questions: D. For the third payment, how much goes to pay the interest? E. How much is the outstanding balance after the 3rd payment? F. How much should be the outstanding balance after the 4th or last payment? G. How much is the total amount of regular payment for 4 years? H. How much is the total interest paid for 4 years? L How much is the total payment for the principal for 4 years? 01234

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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.