How much would a borrower have to pay if they take out a $30,000 loan and are charged two points?

How much would a borrower have to pay if they take out a $30,000 loan and are charged two points?

• A. $30,600
• B. $30,000
• C. $30,700
• D. $40,000

Answer: (A)

When a borrower takes out a loan and is charged points, the lender typically charges a percentage of the loan amount as an upfront fee. Each point is equal to one percent of the loan amount. In this case, the loan amount is $30,000, and the borrower is being charged two points. To calculate the cost associated with the points, you would first determine the dollar amount of the points: Two points on a $30,000 loan is calculated as follows: 2% of $30,000 = 0.02 * $30,000 = $600. This means that the borrower would need to pay an additional $600 at the outset. Therefore, the total cost that the borrower ends up paying equals the original loan amount plus the points charged: $30,000 (loan amount) + $600 (points fee) = $30,600. Thus, the total amount the borrower would have to pay is $30,600.

When a borrower takes out a loan and is charged points, the lender typically charges a percentage of the loan amount as an upfront fee. Each point is equal to one percent of the loan amount. In this case, the loan amount is $30,000, and the borrower is being charged two points.

To calculate the cost associated with the points, you would first determine the dollar amount of the points:

Two points on a $30,000 loan is calculated as follows:

2% of $30,000 = 0.02 * $30,000 = $600.

This means that the borrower would need to pay an additional $600 at the outset. Therefore, the total cost that the borrower ends up paying equals the original loan amount plus the points charged:

$30,000 (loan amount) + $600 (points fee) = $30,600.

Thus, the total amount the borrower would have to pay is $30,600.