SayStart.com | Slide 4: BLOC Uses

—Slide 4: How the BLOC Can Be Used —

Let's Look at Another Example

Let's say that you have a student going to college. The cost for annual tuition is $10,000.

You can get a parent PLUS loan to finance the tuition fee at the following terms (sample only, actual terms may differ)

Loan Amount: $10,000*
Fixed Rate: 7.50% (see actual rates)
Repayment Term: 120 months
Monthly Payment: $118.70

*PLUS loans can charge up to 4% origination fees, which means your loan amount may be greater to cover the $10,000 tuition bill

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

Prin

$10,000.00

$118.70

$62.50

$56.20

9,943.80

118.70

62.15

56.55

9,830.34

118.70

61.80

56.91

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.

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[view] SL1: Summary Review
[view] SL2: Use as Money Acct
[view] SL3: Deposits In
[view] SL4: How to Be Used
[view] SL5: Use to Fund Needs
[view] SL6: About Interest
[view] SL7: Emergency Income
[view] SL8: Get the Facts
[view] SL9: Become a Bank
[view] SL10: Conclusion

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