Letitia borrowed $6,000 from her bank 2 years ago. The loan term is 4 years. Each year, she must repay the bank $1,500 plus the annual interest. Which type of loan does she have?

Question

Quizplus · Accepted Answer

Letitia has an amortized loan. An amortized loan requires the borrower to make regular payments that include both principal and interest, with the payments being higher at the beginning of the loan and decreasing over time. In Letitia's case, each year she pays $1,500 plus the annual interest, meaning she is paying down the principal along with the interest. The fact that she has a loan term of 4 years supports this, as amortized loans are typically paid off over a fixed period of time.

Letitia Borrowed $6,000 from Her Bank 2 Years Ago