Q2. Business and Consumer Loans

BUSINESS AND
CONSUMER
LOANS
Prepared by:
SHAIRA B. BORROMEO
Definition of Terms
◦ Business Loan – money lent specifically for a
business purpose.
◦ Consumer Loan – money lent to an individual for
personal or family purpose.
◦ Collateral – assets used to secure the loan.
◦ Term of the Loan – time to pay the entire loan.
Identify whether the following is a consumer or
business loan
Example 1. Mr. Agustin plans to have a barbershop.
He wants to borrow some money from the bank in
order for him to buy the equipment and furniture for
the barbershop.
Answer: Business Loan

business loan
Example 2. Mr. and Mrs. Castro wants to
borrow money from the bank to finance the
college education of their son.
Answer: Consumer Loan

business loan
Example 3. Mr. Alonzo wants to have some
improvements on their 10-year old house. He wants to
build a new room for their 13-year old daughter. He
will borrow money from the bank to finance this plan.
Answer: Consumer Loan

business loan
Example 4. Miss Sally owns a siomai food cart
business. She wants to put another food cart on a new
mall in the other city. She decided to have a loan to
establish the new business.

business loan
Example 5. Roan has a computer shop. She
owns 6 computers. She decided to borrow some
money from the bank to buy 10 more computers.

Solving Problems on Business and Consumer
Loans (Amortization and Mortgage)
◦ Amortization Method – method of paying a loan on
installment basis, usually of equal amounts at regular
intervals
◦ Mortgage – a loan, secured by a collateral, that the
borrower is obliged to pay at specified terms
◦ Outstanding Balance – any remaining debt at a
specified time
1) Mr. Garcia borrowed P1,000,000 for the expansion
of his business. The effective rate of interest is 7%.
The loan is to be repaid in full after one year. How
much is to be paid after one year?
𝐺𝑖𝑣𝑒𝑛 : 𝑃=1,000,000 𝑗=0.07 𝑛=1 𝐹 =?
𝑆𝑜𝑙𝑢𝑡𝑖𝑜𝑛.
𝐹 = 𝑃 ( 1+ 𝑗 )
𝑛
𝐹 = 𝑃h𝑝 1,070,000
1
𝐹 =1,000,000 ( 1+0.07 )
Therefore, an amount of must be paid
after one year.
2) A person borrowed P1,200,000 for the purchase of
a car. If his monthly payment is P31,000 on a 5-year
mortgage, find the total amount of interest.
𝐺𝑖𝑣𝑒𝑛: 𝑃=1,200,000 𝑚𝑜𝑛𝑡h𝑙𝑦 𝑝𝑎𝑦𝑚𝑒𝑛𝑡 =31,000
𝑇h𝑒 𝑡𝑜𝑡𝑎𝑙 𝑎𝑚𝑜𝑢𝑛𝑡 𝑝𝑎𝑖𝑑 𝑖𝑠 𝑔𝑖𝑣𝑒𝑛 𝑏𝑦
𝑇𝑜𝑡𝑎𝑙 𝑎𝑚𝑜𝑢𝑛𝑡 =( 31,000 ) (12 𝑚𝑜𝑛𝑡h𝑠 ) (5 𝑦𝑒𝑎𝑟𝑠)
𝑇𝑜𝑡𝑎𝑙 𝑎𝑚𝑜𝑢𝑛𝑡 = 𝑃h𝑝 1,860,000
2) A person borrowed P1,200,000 for the purchase of
a car. If his monthly payment is P31,000 on a 5-year
mortgage, find the total amount of interest.
𝐺𝑖𝑣𝑒𝑛: 𝑃=1,200,000 𝑚𝑜𝑛𝑡h𝑙𝑦 𝑝𝑎𝑦𝑚𝑒𝑛𝑡 =31,000
𝑇𝑜𝑡𝑎𝑙 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 =1,860,000 −1,200,000

𝑇𝑜𝑡𝑎𝑙 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 = 𝑃h𝑝 660,000
Therefore, the total amount of interest

is .
3) If a house is sold for P3,000,000 and the bank
requires 20% down payment, find the amount of
mortgage.
𝐷𝑜𝑤𝑛𝑝𝑎𝑦𝑚𝑒𝑛𝑡 =𝑑𝑜𝑤𝑛 𝑝𝑎𝑦𝑚𝑒𝑛𝑡 𝑟𝑎𝑡𝑒× 𝑐𝑎𝑠h 𝑝𝑟𝑖𝑐𝑒
𝐷𝑜𝑤𝑛 𝑝𝑎𝑦𝑚𝑒𝑛𝑡 =0.20(3,000,000)
𝐷𝑜𝑤𝑛𝑝𝑎𝑦𝑚𝑒𝑛𝑡 = 𝑃h𝑝 600,000
3) If a house is sold for P3,000,000 and the bank
requires 20% down payment, find the amount of
mortgage.
𝐴𝑚𝑜𝑢𝑛𝑡 𝑜𝑓 𝑡h𝑒 𝑙𝑜𝑎𝑛=𝑐𝑎𝑠h 𝑝𝑟𝑖𝑐𝑒− 𝑑𝑜𝑤𝑛 𝑝𝑎𝑦𝑚𝑒𝑛𝑡
𝐴𝑚𝑜𝑢𝑛𝑡 𝑜𝑓 𝑡h𝑒 𝑙𝑜𝑎𝑛=3,000,000 − 600,000
𝐴𝑚𝑜𝑢𝑛𝑡 𝑜𝑓 𝑡h𝑒 𝑙𝑜𝑎𝑛= 𝑃h𝑝 2,400,000
Thus, the mortgage amount is

Try these:
1. A loan of P300,000 is to be repaid in full after 2 years. If
the interest rate is 9% per annum. How much should be
paid after 2 years? 𝑃h𝑝 356,430.
2. If a car loan of P790,000 requires a 20% down payment,
how much is the mortgage? 𝑃h𝑝 632,000.
3. Shawn borrowed P1,000,000 for the purchase of a car. If
his monthly payment is P25,000 on an 8-year mortgage,
find the total amount of interest. 𝑃h𝑝 1,400,000.
Outstanding Balance
◦ Prospective Method – the method in

computing the outstanding balance of a loan.
◦ Get the present value of all remaining payments.
◦ Use the symbol to denote the outstanding balance after
payments.
4)Mrs. Fe borrowed some money from a bank that
offers an interest rate of 12% compounded monthly.
Her monthly amortization for 5 years is P11,122.22.
How much is the outstanding balance after the 12 th
payment?
0.12
𝐺𝑖𝑣𝑒𝑛 : 𝑅= 11,122.22 𝑗= = 0.01
12
𝑘=𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑝𝑎𝑦𝑚𝑒𝑛𝑡𝑠
𝑛− 𝑝𝑎𝑖𝑑
𝑘=𝑟𝑒𝑚𝑎𝑖𝑛𝑖𝑛𝑔 𝑝𝑎𝑦𝑚𝑒𝑛𝑡𝑠
𝑘=12 𝑛 − 𝑘=12 ( 5 ) − 12 = 48
4)Mrs. Fe borrowed some money from a bank that offers an
interest rate of 12% compounded monthly. Her monthly
amortization for 5 years is P11,122.22. How much is the
outstanding balance after the 12 th payment?
𝑆𝑜𝑙𝑢𝑡𝑖𝑜𝑛 :
[ ]
−( 𝑛 −𝑘 )
1 − (1+ 𝑗)
𝐵 𝑘= 𝑅
𝑗
[ ]
−(48)
1 −(1+0.01)
𝐵12 =11,122.22
0.01
𝐵12= 𝑃h𝑝 422,354.73
5) Mr. and Mrs. Co purchased a house and lot worth
P4,000,000. They paid a down payment of P800,000.
They plan to amortize the loan of P3,200,000 by
paying monthly for 20 years. The interest rate is 12%
convertible monthly.
𝑎 ¿ 𝐻𝑜𝑤 𝑚𝑢𝑐h 𝑖𝑠 𝑡h𝑒 𝑚𝑜𝑛𝑡h𝑙𝑦 𝑝𝑎𝑦𝑚𝑒𝑛𝑡 ?
𝑏¿ 𝑊h𝑎𝑡 𝑖𝑠 𝑡h𝑒 𝑡𝑜𝑡𝑎𝑙 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑝𝑎𝑖𝑑 ?
𝑐 ¿ 𝑊h𝑎𝑡 𝑖𝑠 𝑡h𝑒 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 𝑏𝑎𝑙𝑎𝑛𝑐𝑒 𝑎𝑓𝑡𝑒𝑟 𝑡h𝑒 50 𝑡h 𝑝𝑎𝑦𝑚𝑒𝑛𝑡 ?
P4,000,000. They paid a down payment of P800,000. They
plan to amortize the loan of P3,200,000 by paying monthly for
20 years. The interest rate is 12% convertible monthly.
𝑎 ¿ 𝐻𝑜𝑤 𝑚𝑢𝑐h 𝑖𝑠 𝑡h𝑒 𝑚𝑜𝑛𝑡h𝑙𝑦 𝑝𝑎𝑦𝑚𝑒𝑛𝑡 ?
0.12
𝐺𝑖𝑣𝑒𝑛 : 𝑃 =3,200,000 𝑗 = = 0.01 𝑛=12 ( 20 ) =240
12
𝑃 3,200,000
𝑅= 𝑅=
( ) ( )
− 240
1 − (1 + 𝑗 )− 𝑛 1 − (1 +0.01 )
𝑗 0.01
𝑅 = 𝑃h𝑝 35,234.76
𝑏 ¿ 𝑊h𝑎𝑡 𝑖𝑠 𝑡h𝑒 𝑡𝑜𝑡𝑎𝑙 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑝𝑎𝑖𝑑 ?
𝐺𝑖𝑣𝑒𝑛 : 𝑃 =3,200,000 𝑅=35,234.76 𝑛=12 ( 20 ) =240
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐴𝑚𝑜𝑢𝑛𝑡=𝑇𝑜𝑡𝑎𝑙 𝑃𝑎𝑦𝑚𝑒𝑛𝑡𝑠 − 𝑃𝑟𝑖𝑛𝑐𝑖𝑝𝑎𝑙
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐴𝑚𝑜𝑢𝑛𝑡=(35,234.76 × 240)−3,200,000
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐴𝑚𝑜𝑢𝑛𝑡=8,456,342.40 −3,200,000
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐴𝑚𝑜𝑢𝑛𝑡= 𝑃h𝑝 5,256,342.40
𝑐 ¿ 𝑊h𝑎𝑡 𝑖𝑠 𝑡h𝑒 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 𝑏𝑎𝑙𝑎𝑛𝑐𝑒 𝑎𝑓𝑡𝑒𝑟 𝑡h𝑒 50 𝑡h 𝑝𝑎𝑦𝑚𝑒𝑛𝑡 ?
0.12
𝐺𝑖𝑣𝑒𝑛 : 𝑅= 35,234.76 𝑗 = =0.01 𝑛= 12 ( 20 ) =240
12
[ ]
−( 240− 50)
1 − (1+ 0.01)
𝐵50 =35,234.76
0.01
𝐵50 = 𝑃h𝑝 2,991,477.63
Try this!
Mrs. Tan got a business loan worth P800,000. She promised to
pay the loan semi-annually in 5 years. The semi-annual
payment is P103,603.66 if money is worth 10% converted
semi-annually. How much is the outstanding balance after the
third payment?
0.10
𝐺𝑖𝑣𝑒𝑛 : 𝑅= 103,603.66 𝑗 = =0.05 𝑛=2 ( 5 ) =10
2
[ ]
−(10 −3 )
1 − (1+0.05)
𝐵3= 103,603.66
0.05
𝐵3= 𝑃h𝑝 599,489.46

Q2. Business and Consumer Loans

Uploaded by

Copyright:

Available Formats

Q2. Business and Consumer Loans

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Q2. Business and Consumer Loans

Uploaded by

Copyright:

Available Formats

BUSINESS AND

Answer: Business Loan

Answer: Consumer Loan

Answer: Consumer Loan

Answer: Business Loan

Answer: Business Loan

𝑇𝑜𝑡𝑎𝑙 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 =1,860,000 −1,200,000

Therefore, the total amount of interest

Thus, the mortgage amount is

◦ Prospective Method – the method in

You might also like