Dafydd has bought a new van.
To pay for the van, he has taken out a loan for £18 000. The loan has an APR of 3%, and will be repaid by monthly payments of £237.84.
The amount that is still to be repaid on a loan is known as the remaining balance. The formula below can be used to calculate the remaining balance on a loan after a period of time from the start date of the loan:
where,
r is the monthly interest rate written as a decimal, L is the loan amount in pounds, M is the monthly payment in pounds, n is the number of months after the start date of the loan.
Dafydd plans to sell the van in 5 years’ time for £5000. Will he have enough money from the sale of the van to pay off the remaining balance on the loan?
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