Secured Unsecured
Credit APR APR
Excellent 4.75% 5.50%
Good 5.00% 5.90%
Average 5.85% 6.75%
Fair 6.40% 7.25%
Poor 7.50% 8.40%
Use the table above for interest rate questions.
If your parents’ credit rating for question 18 had been average, how much is the principal balance at the end of the first month after applying the $925.67 payment?
To calculate the principal balance at the end of the first month after applying the $925.67 payment with an average credit rating, we first need to determine the monthly interest rate for an average credit rating.
The APR for an average credit rating is 5.85% for secured credit. The monthly interest rate can be calculated by dividing the annual rate by 12:
Monthly interest rate = 5.85% / 12 = 0.004875
Next, we calculate the interest portion of the payment:
Interest payment = Previous balance x Monthly interest rate
Interest payment = Principal balance x 0.004875
Now, we subtract the interest payment from the total payment to find the amount that will be applied to the principal balance:
Principal payment = Total payment - Interest payment
Principal payment = $925.67 - Interest payment
Lastly, we subtract the principal payment from the previous balance to find the new principal balance:
New principal balance = Previous balance - Principal payment
You will need the previous balance in order to calculate the new principal balance after applying the payment. If you provide the previous balance, I can help you calculate the new principal balance.