To purchase a new truck, you borrow $42,000. The bank offers an interest rate of 7.5% compounded monthly. If you take a 5-year loan and you will be making monthly payments, what is the total amount that must be paid back?

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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.