SLIDE 4: how the BLOC can be used

Let's Look at Another Example

Let's say that you need to install new windows in your home. The cost for the windows and installation is $10,000.

You can get a home improvement loan through the window supplier to finance the cost at the following terms (sample only, actual terms may differ):

Loan Amount: $10,000
Fixed Rate: 7.50%
Repayment Term: 120 months
Monthly Payment: $118.70

The total amount of interest and principal paid over the 120-month term at 7.50%:

Total Payments	$14,244
Total Interest Paid	$4,244
Total Principal Paid	$10,000

Your loan repayment plan would look like this:

Month	Starting Balance	Monthly Payment	Interest	Principal
1	$10,000.00	$118.70	$62.50	$56.20
2	9,943.80	118.70	62.15	56.55
3	9,830.34	118.70	61.80	56.91
4	9,773.08	118.70	61.44	57.26
117	467.48	118.70	2.92	115.78
118	351.70	118.70	2.20	116.50
119	235.20	118.70	1.47	117.23
120	117.96	118.70	0.74	117.96
Total:		$14,244	$4,244	$10,000

 

In this Example

An amortization schedule is calculated that shows that the borrower must pay $118.70 each month for 120 months in order to meet the interest obligation and to pay down the borrowed amount to $0 over 10 years.

The interest charges for the first month is calculated as such:

$10,000 X 7.50% (divided by) 12 months = $62.50

In the first payment, the borrower pays the lender $62.50 in interest. The remaining amount of $56.20 will repay the loan and reduce the borrowed amount to $9,943.80.

The interest charges for the second month is calculated as such:

$9,943.80 X 7.50% (divided by) 12 months = $62.15

In the second payment, the borrower pays the lender $62.15 in interest. The remaining amount of $56.55 will repay the loan balance and reduce the borrowed amount to $9,830.34.

This will continue all the way through the 120th payment, where the borrower pays the lender $0.74 in interest. The remaining amount of $117.96 will repay the loan balance and reduce the borrowed amount to $0. The loan obligation has been paid off.