Lucky Louie applied for a $5,000 loan payable in one year and was provided the following data; interest due at payoff of $750, application fee $100, credit check $75, processing fee $75. What is the APR of Louie's loan?

Question

Quizplus · Accepted Answer

The APR is calculated using the following formula: APR = (Total Finance Charges / Amount Financed) x (365 / Days in Loan Term) x 100. In this case, the total finance charges are $750 (interest due at payoff) + $100 (application fee) + $75 (credit check) + $75 (processing fee) = $1,000. The amount financed is $5,000. The days in the loan term are 365. Therefore, the APR is ($1,000 / $5,000) x (365 / 365) x 100 = 20%.

Lucky Louie Applied for a $5,000 Loan Payable in One