Personal finance a: 6.03 assignment: loan payments and financing
part 1: auto loans
suppose you want to buy a car. if you do not have the cash to pay for it, you must borrow the money. if you have a job and can’t borrow the money from your parents, you can get a loan. when you borrow money for a car, you must pay the money back with interest. the interest is a percentage of the cost of the car and is calculated as an annual percentage rate (apr). luckily, you can easily find auto loan calculators online using a search engine. you can figure out how much you can afford to pay for a car and how much you will pay in both principal (actual cost of the car) and interest.

use the keywords “auto loan calculator” in a search engine to find a loan calculator to figure out how much the loan will actually cost in the following scenarios:

scenario 1: you saved $5,000 to buy a car. the car you want costs $23,000 and you will need a loan. you find a lender that offers loans for 3.9 percent interest over 60 months. if you use the $5,000 as a down payment, how much money will you need to borrow and how much money will the loan cost after 60 months.

amount borrowed:
monthly payment amount:
total cost of loan (monthly payment x 60):

scenario 2: you have $1,000 for a down payment on a car. you can pay no more than $250 a month for 60 months for a car note. you qualify for a loan at 7.9 percent interest. how much can you afford to pay for a car?

price of car you can afford:

scenario 3: the car you want costs $19,000. you can only afford to pay a monthly car note of $200 for 60 months. you qualify for a loan at 9.9 percent interest. how much money will you need to put down to afford the car?

amount needed for down payment:

part 2: home loans
your first house will probably not be a sprawling mansion. you must be able to afford the monthly mortgage. a mortgage is a loan for a home. most home loans are amortized. this means that you pay some money on the principal amount that you owe on your loan and some of the interest you owe on your loan periodically. the more money you save to put down on your home, the less money you need to borrow.

use the keywords “mortgage loan calculator” in a search engine to find a loan calculator to figure out how much loan you can afford or how much the loan will actually cost in the following scenarios:

scenario 1: you can afford a mortgage of $800 per month and you saved $5000 for a down payment on your first home. what is the maximum home purchase price that you can afford at 4.25 percent interest?

maximum purchase price of home:

scenario 2: you found the perfect starter home. it is a condominium that costs $58,000. you will have to pay $150 each month for your condo fees. you have $1000 to put down and found a loan with a 5.25 percent interest rate. how much will your mortgage plus condo fee be each month?

monthly payment + $150 condo fee:
(home loans, cont.)
scenario 3: the home that you want to buy costs $199,000. you can’t afford a mortgage of more than $750. how much will you need to put down on the mortgage and what will your interest rate need to be for you to afford the house?

down payment needed:
interest rate needed:

part 3: loan financing
when you get that first long-term job, you may want to start thinking about a place to live and a car. as a general rule, your long-term debt should be no more than 36 percent of your gross monthly income. the gross is how much you make. that is not your net income. the net income is how much you take home after taxes.
• for example, mike’s first job pays $32,000 per year. his monthly gross is about $2,666 ($32,000/12). his housing costs and car note should cost no more than $960 ($2,666 x .36) each month.

analyze your needs for the following two scenarios:

scenario 1: you are a recent high school graduate and found a job making $34,000 a year with benefits.

monthly gross income:
amount you can afford for both home and car:

scenario 2: you are a recent college graduate and found a job making $53,000 a year with benefits.

monthly gross income:
total amount you can afford for both home and car:

use the internet to find home and car listings in your area, a mortgage calculator, and an auto loan calculator. you should also research average interest rates for cars and homes. find a home and car that fits your budget needs for scenario 2. include internet links for the home and car you find. show your calculations.

link for home:

price of home:
down payment:
interest rate:
years financed:
monthly payment:

link for car:

price of car:
down payment:
interest rate:
months financed:
monthly payment: