If the add-on method is used to calculate a finance charge of $100.80 on a $1,800 loan, the amount to be:
A)disbursed is $1,900.80.
B)disbursed to the borrower is $1,800.
C)repaid is $1,699.20.
D)repaid to the borrower is $1,800.
E)disbursed to the borrower is $100.80.

Question

Quizplus · Accepted Answer

The add-on method involves adding the total finance charge to the principal amount of the loan upfront. The borrower receives the full loan amount ($1,800 in this case), and the finance charge ($100.80) is added to the loan's balance for repayment purposes. Therefore, the amount disbursed to the borrower remains the original loan amount of $1,800.

If the Add-On Method Is Used to Calculate a Finance