To determine the finance charge on a loan, we first need to calculate the total amount paid over the life of the loan and then compare that with the principal amount borrowed.
The total amount paid over 60 months (5 years) with monthly payments of $162.80 is:
- Total Payments = Monthly Payment × Number of Payments
- Total Payments = $162.80 × 60 = $9,768
Now that we have the total payments, we can find the finance charge:
- Finance Charge = Total Payments – Principal
- Finance Charge = $9,768 – $8,000 = $1,768
Therefore, the finance charge on the $8,000 loan with those monthly payments over 60 months is $1,768.