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Loan Calculator Challenge Worksheet

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Loan Calculator Challenge Worksheet

Help two fictional customers compare borrowing options. Use a loan calculator if available, or show your method. Assume fixed monthly repayments, APR divided by 12 for the monthly rate, and round money to the nearest penny. A calculator result may differ by a few pence because of rounding.

Borrowing basics

Read each question carefully. APR is the annual cost of borrowing expressed as a percentage.

1.What does APR stand for?

Annual Payment Rate
Annual Percentage Rate
Average Payment Return

2.Select the two changes that would usually increase the monthly repayment, if the other details stay the same.

Borrowing a larger amount
Getting a lower APR
Choosing a shorter term
Choosing a longer term

3.Complete both sentences: Interest is the paid for borrowing money. A loan is money that you and agree to pay back.

Use the loan calculator

For each loan, find the monthly repayment, total repaid and total interest. Total repaid = monthly repayment × number of months. Total interest = total repaid − amount borrowed.

4.Amelia borrows £2,000 at 6% APR for 2 years, with fixed monthly repayments. Calculate the monthly repayment, total repaid and total interest.

5.A car loan is £8,000 at 4.5% APR for 3 years, with fixed monthly repayments. Calculate the monthly repayment, total repaid and total interest.

6.Compare the loans in Questions 4 and 5. Which costs more in total interest? Give one reason why the difference is not explained by APR alone.

Make a careful choice

A laptop buyer has been offered two ways to borrow £1,500. Compare the overall cost as well as the monthly commitment.

Offer

APR and term

Monthly repayment

12% APR for 1 year

Calculate

8% APR for 2 years

Calculate

7.Use the offers above to calculate each monthly repayment and total interest. Which offer costs less overall, and what trade-off might the buyer consider?

8.Explain how a person's credit history might affect the APR a lender offers. Why should someone compare more than just the monthly repayment?

9.Write two practical checks someone should make before agreeing to their first loan.