Question

Which of the following loans will have a higher total cost?

A loan for $5,000 at 3.5 percent over a loan period of four years.
A loan for $5,000 at 3.5 percent over a loan period of six years.

Answer 1

A loan for $5,000 at 3.5% percent over a period six years.

Answer 2

The 6 year period will have a higher cost because it is two years longer than the other one. For a 6 year period it will cost $6146.28 whereas a 4 year period would cost $5737.62