Jackson borrowed $25,000 on August 10, 2011. He repaid $8,000 on November 1, 2011, $5,350 on December 15, 2011, and the balance on February 20, 2012. The interest rate was set at 10.00%. a) How much of the first payment was used to pay down the loan principal? (ie: not interest) b) How much of the second payment went to pay interest charges (ie: not principal)? c) How much was the final payment?

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Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.