Interest You Pay
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Print Interest You Pay Reading Comprehension
||edHelper's suggested reading level:
||high interest, readability grades 5 to 7
||Flesch-Kincaid grade level:
||rates, mortgage, minimum, solution, multiplies, banks, especially, calculate, rate, percentage, basis, multiply, lowest, early, actually, such
Interest You Pay
By Patti Hutchison
1 Do you have a car loan or a mortgage? Do you use credit cards? If so, you pay interest. What is interest, and how does it work?
2 Whenever a bank or business loans you money, they charge interest. Interest is extra money you pay back on the money you borrowed. Interest is figured on a percentage basis.
3 For example, let's say you borrow $10,000 to buy a car. You get a great interest rate of seven percent A.P.R. (A.P.R. means annual percentage rate.) You are going to pay back the loan over five years.
4 The bank calculates your interest. They multiply the $10,000 by seven percent. It comes out to $700. This is the amount of interest you pay for one year. Then the bank multiplies that by five years. The total interest you will pay on your car loan is $3500. This means that if you pay all 60 payments, you will actually pay $13,500 for your car that only cost $10,000.
5 Your monthly payment is figured with the interest on the loan. The bank takes the $13,500 total payment and divides it by 60 months. Your payment is $225 per month. You pay the interest over time. Then it doesn't seem like so much.
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