To determine the finance charge on a loan, we first understand that the finance charge represents the total cost of borrowing, which includes interest rates and any additional fees. In this case, we have:
- Loan Amount: $8,000
- Monthly Payment: $162.80
- Loan Term: 60 months
1. **Find the Total Amount Paid Over the Loan Term:**
Start by calculating the total amount you will pay over the life of the loan. This is done by multiplying the monthly payment by the number of months:
Total Payments = Monthly Payment × Number of Months
Substituting in the values:
Total Payments = $162.80 × 60 = $9,768
2. **Calculate the Finance Charge:**
Next, the finance charge can be calculated by subtracting the loan amount from the total payments made:
Finance Charge = Total Payments - Loan Amount
Substituting in the values:
Finance Charge = $9,768 - $8,000 = $1,768
3. **Conclusion:**
Therefore, the finance charge on an $8,000 loan with a monthly payment of $162.80 over 60 months is $1,768. This figure indicates the total cost of borrowing and is essential for understanding the true expense of the loan.