Hudson hunts for a loan

Use the Cost of a Loan calculator to evaluate Hudson’s three options. Watch him decide, then vote on whether you think he’s right.


To borrow $10,000 to buy a motor scooter at the lowest total cost of credit, while keeping his monthly payments under $400.
I’m going to get a loan at 12.25% interest with a 24-month term.
I’m going to get a loan at 14.50% interest with a 36-month term.
I’m going to get a loan at 16.75% interest with a 48-month term.
Is this the best choice for Hudson?
You're right! Your friend made the best choice.
Actually, there is a better choice.
You're right! There is a better choice.
Actually, your friend made the best choice.

Hudson hunts for a loan … continued

Between these three alternatives, Hudson’s best choice is to get the loan with the 36-month term.

Best Choice

Why is this the best choice?
With the 24-month term his monthly payment will be higher, and with the 48-month term his cost of interest will be higher.
If you have a choice between three different lengths of loan terms, it’s generally a smart idea to pick the middle one.
With the 24-month term his monthly payments will be too high, and the 36-month term will cost less in interest than the 48-month.
He’ll probably only own the scooter for about three years, so a 36-month term makes sense.
Right! Also, notice that lenders will usually offer you a lower interest rate for a shorter term loan.
Not quite. Remember: the longer the term, the lower the monthly payments, but the higher the amount of interest over the life of the loan.
Watch Hudson Decide
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Remember: Annual Percentage Rate (APR) is a measurement you can use to compare the cost of different loans. The lower the APR, the lower the total cost of the loan.
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