plus loan

- welcome to a video that will show you how to use your ti83 or 84 graphing calculator to obtain information about getting a loan. the ti83 or 84 has a finance application that can be helpful in becoming more knowledgeable about a loan and how loan amount, interest rate, and monthly payments affect a loan. this information will make you much more informed about a loan before you take out a loan,

and will hopefully make you a better negotiator. is trusting the person selling you a loan in your best interest? if you go to a car lot to purchase a car, you are often faced with a high pressure sales person who tries to determine a monthly payment you can afford. wouldn't it be better to be negotiating the sale price of a car rather than a monthly payment? so if you can afford a monthly payment of $200,

what price range of a car can you afford? let's take a look at our graphing calculator. from the home screen, if you press the application key, and then select the finance option, and then select the tmv solver option. this screen allows you to enter in all of this information and then solve for one unknown. so n represents the total number of compounds for the loan. "i" is the interest rate.

present value represents the loan amount. pmt represents the monthly payment. future value would be zero when the loan is paid off. py represents the payment per year. and cy represents the compounds per year. and our payments are either at the end or the beginning of each month. so typically a car loan is for five years, and we'll assume monthly compounds.

so 5 years x 12 months that would be 60 for n. well, let's assume the interest rate will be 5.9% for right now. the present value of the loan we don't know, but we do have to enter in some value temporarily. so let's go ahead and enter zero. the payment we said would be $200 per month. the future value will be zero. payment per year will be 12. compound per year will be 12.

and the payments will be at the end of the month. now what we can do is go back up to the present value of the loan. now we'll clear this value. and if we press alpha, enter, it will return the loan amount that we can afford. so at 5.9% interest for 5 years, and a $200 monthly payment, we could afford a loan that is roughly $10,370. so if we're looking for a car,

we should look for a car that's roughly in this price range, hopefully a little bit less. now, the second question states, if we can negotiate an interest rate of 1.9% instead of 5.9%, how much would that save us? so what we can do here, is go back and change this interest rate to 1.9, and now we want to see how this would affect our monthly payments.

we go down to monthly payment, clear this, and now press alpha, enter, and it will calculate what our monthly payment would be. notice it dropped from $200 a month to just over $181 per month. so what we can do here, is change any of these, and then solve for one of the unknowns. now, when you go to purchase a car don't forget to research how much car insurance

will also cost. let's take a look at purchasing a home now. purchasing a home is one of the biggest purchases of most people's lives. if you have saved $10,000 to purchase a home, and have determined that you can afford a monthly payment of $950, what price range can you afford at 5% interest? let's go back to the calculator.

now, typically a loan for a home is for 30 years. 30 x 12 would be 360 months. the interest rate we're saying is 5%. we don't know the present value, but we do have to type in some number here. let's go ahead and enter zero. the payment we said we could afford was $950. the future value would be zero. and, again, we have monthly payments,

and monthly compounded interest, we're paying at the end of each month. so we go back up to present value, clear this, and press alpha, enter. and this tells us that we could afford a loan amount of just under $177,000. so since we have $10,000 saved up, we could purchase a home that's worth roughly $187,000. the second question states,

if we could find a home that cost $150,000 instead of maxing out our loan amount, how much would this save us per month? so what we can do now, is change the present value of the loan to-- it actually wouldn't be $150,000, it would be 140 because we have $10,000 for the down payment. so we'll enter in a present value of -$140,000, and we want to know how that would affect

our monthly payment. so we'll go down to our payment, clear this, press alpha, enter. and instead of paying $950 per month, we would be paying just over $750 per month, so a large drop in the monthly payment if we can find a home that's a little bit cheaper. now, there's a lot of other costs that go into owning a home. don't want to forget about closing costs,

insurance, taxes, and hoa fees that can also increase your total cost. let's go and take a look at one more example. a lot of people are thinking about refinancing a home right now. if you currently owe $235,000 on your home and you pay 6.8% interest, with a monthly payment of $1500, with 28 years left on a 30 year mortgage. if you can refinance at 4.25% at a cost of $3,500,

which will be added to the balance of the loan, how much could you save per month with the new loan? let's go back to the calculator and set this up. so, again, we're going to have a 30 year loan, so n is going to be 30 x 12, 360. the new interest rate will be 4.25%. the present value of the loan is going to be $235,000 plus the extra cost of $3,500. so the present value is going to be -$238,500.

and we do have to remember that present value is always going to be negative when you take a loan out. the payment we don't know, that's what we're trying to determine. everything else here looks good. so what we're going to do now, is clear this, and then press alpha, enter, to calculate the new payment. looks like it's going to be roughly $1,173.28. let's go ahead and write that down.

and if we compare these two monthly payments, you can see it drops considerably. well over $300 is saved per month. the only thing we do have to consider, though, is that this new loan is going to be for 30 years versus this loan is only for 28 years. but in most cases, this refinance at a lower rate, even though we had some additional cost, is going to save a considerable amount of money each month.

okay, that'll do it for this video. i hope you found it helpful. thank you for watching. â