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Section 11.4:
Installment Buying
Math 121
Installment Loans
•Sometimes, there are circumstances which makes it
more convenient for the borrower to repay a loan on a
weekly or monthly basis as opposed to repaying the
loan with a single payment like many of the loans we
saw in the earlier sections.
•One way to repay a loan on a weekly or monthly basis
is to borrow money on an installment plan.
•2 types of installment loans:
1. _______________________: you pay a fixed payment for a
set number of payments.
2. ______________________: you can make variable payments
each month. The most popular type is credit card loans.
•We will only focus on open-end installment loans in this
section.
Open-end installment loan
•Credit cards are excellent examples of an open-end
installment loan.
•Credit cards normally have a _________________
for purchases and cash advances, along with an
_________________________________ for
purchases and cash advances.
For example,
Type of Charge Daily Periodic Rate Annual Percentage Rate
Purchases 0.047292% 17.49%
Cash Advances 0.05477% 19.99%
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Credit Card Statements
•A monthly credit card statement usually will
contain the following:
•Balance at the beginning of the period
•Balance at the end of the period
•Transactions for the period
•Statement closing date (billing date)
•Payment due date
•Minimum payment due
Credit Card Statements
•For purchases, there is no finance or interest charge if there is no
previous balance due and you pay the entire new balance by the
payment due date.
•_______________________is the time (usually about 20-25 days)
between when a purchase is made and when the credit card
company begins charging interest.
•A ______________________is when you use a credit card to
borrow money. Typically there is no grace period on a cash
advance and finance charges begin from the day you borrow the
