which of the following will increase the cost of a loan?
-when the interest rate (APR) increases?
-when the dealer offers 0% interest?
-when the length of the loan decreases?
-when the interest rate (APR) decreases?
There are many factors that may contribute to the cost of credit. These factors may vary depending upon the type of credit used. For example, the cost of an automobile loan is affected by different factors than the cost of money borrowed on a credit card. However, there are three main factors that affect the cost of all types of credit:
Interest – Interest is the charge for borrowing money. Interest is expressed as a percentage rate. The higher the interest rate, the more interest you will pay and therefore, the more expensive credit will be.
Time period – The time period is the length of time it takes to repay the borrowed money. The longer the time period, the more interest you will pay and therefore, the more expensive credit will be.
The amount borrowed – The more money you borrow, the more money you are going to pay back. Depending upon the specific time period and interest rate, you may pay more interest the more money you borrow.
To summarize, as the interest rate increases so does the cost of credit. As the time period increases so does the cost of credit. The more money you borrow, the more you will have to pay back.