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  1. keannu's Avatar
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    #1

    pay $16,000 more in interest

    I think this is a problem of common sense, and you can only heed to the last sentence. How could a bank take "$16,000" of interest annually or monthly, whatever for $50,000 loan from a loaner? Is $16,000 of interest for an individual customer or a group of customers for a loan type? $16,000 seems too big for an individual.

    go3mo6-30
    ex)We tend to consider ourselves as rational decision makers,logically evaluating the costs and benefits of each alternative we encounter. However, we are much more primitive than most assume. A team of economists looked at how consumers reacted to various pitches by banks to take out a loan. A purely rational view would have predicted that interest rateswould be the only factor that had an impact. But the scientists varied more than just the interest rate; they also tested how persuasive other approaches might be. For instance, some letters offered a chance to win a cell phone in a lottery if the customer came in to inquire about a loan. They found that such an offer increased loan inquiries by as much as dropping the interest rate five points. For a $50,000 loan, this meant some customers were in essence willing to pay $16,000 more in interest to receive a $100 cell phone.
    Last edited by keannu; 13-May-2012 at 17:04.

  2. 5jj's Avatar
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    #2

    Re: pay $16,000 more in interest

    Quote Originally Posted by keannu View Post
    I think this is a problem of common sense, and you can only heed to the last sentence. How could a bank take "$16,000" of interest annually or monthly, whatever for $50,000 loan from a loaner? Is $16,000 of interest for an individual customer or a group of customers for a loan type? $16,000 seems too big for an individual.
    It's $16,000 more. There is no mention of 'monthly' or 'annual' payments. The writer is almost certainly referring to the total interest. $16,000 more is very possible:

    First Loan:
    Loan Balance: $50,000.00
    Loan Interest Rate: 10.00%
    Loan Term: 10 years
    Monthly Loan Payment: $660.75
    Number of Payments: 120
    Cumulative Payments: $79,290.76
    Total Interest Paid: $29,290.76

    Second Loan:

    Loan Balance: $50,000.00
    Loan Interest Rate: 5.00%
    Loan Term: 10 years
    Minimum Payment
    Monthly Loan Payment: $530.33
    Number of Payments: 120
    Cumulative Payments: $63,639.22
    Total Interest Paid: $13,639.22
    Last edited by 5jj; 13-May-2012 at 17:04. Reason: formatting

  3. keannu's Avatar
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    #3

    Re: pay $16,000 more in interest

    I'm only amazed at your zeal to teach. I don't know how to appreciate it(zillions of exclamation mark).

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