Question

If a loan option had been available for your food truck for the $50,000 at 4% interest for 6 years instead of 4 would you have taken that option instead? Why or why not?

Answer 1

It depends.

Explanation:

For 6 years:

`50000*(1.04)^6=\$63266`

On average, you would have to be profiting:

`(63266)/(6)=\$10544` per year

For 4 years:

`50000*(1.04)^4=\$58492`

On average, you would have to be profiting:

`(58492)/(4) = \$14623` per year.

It would be better to have the longer term option - although you will be paying off more in total, you would be paying off a smaller portion of your earnings.

However, you may want to pay off the loan faster as you would no longer have to worry about it, and it would be cheaper to pay off over the shorter period.