Mary's credit card situation is out of control because shecannot afford to make her monthly...

Mary's credit card situation is out of control because she cannot afford to make her monthly payments. She has three credit cards with the following loan balances and APRs: Card 1, $5,000, 21%; Card 2, $5,800, 25%; and Card 3, $3,100, 19%. Interest compounds monthly on all loan balances. A credit card loan consolidation company has captured Mary's attention by stating they can save Mary 26% per month on her credit card payments. This company charges 17.5% APR. Is the company's claim correct? Assume a 10-year repayment period. Mary's current minimum monthly payments are $nothing. (Round to the nearest cent.)

Solutions

Expert Solution

Current minimum monthly Payments = $289.78

Monthly payments under consolidation company = $246

Savings because of consolidation = (Current monthly payments - payments to consolidation company) / Current monthly payments

Savings because of consolidation = (289.78 - 246) / 289.78

Savings because of consolidation = 15.11%

jeff jeffy answered 1 year ago

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