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Loan companies offer a variety of options for consolidating debt. This assignment gives you an opportunity to study such offerings.

The problem: Amanda's current debt consists of three types of loans: a bank card, an auto loan and a department store card. She owes a total of $25,000 and her monthly payments sum to $521.77.

The amount she owes, the monthly payment and the interest rates appear in the table below:

Loan Type	Annual Percentage Rate, (APR)		Loan Amount Current Debt	Monthly Payment
Bank Card	18%		$10,000	$203.21
Auto Loan	5.5%		$12,500	$238.76
Department Store Card	15%		$ 2,500	$ 79.80
TOTALS			$25,000	$521.77

Amanda is having a hard time meeting the monthly payments and is considering consolidating the three loans to reduce her total monthly payments. She has been offered two options. In both cases, she would borrow $25,000 to pay off her existing three loans leaving her with a single loan payment to a loan company.

Option A: A $25,000 home equity line of credit based on 7.8% APR annualized over a 10 year

term. The loan is amortized at 7.8% with monthly payments of $162.50. This

reduces her monthly payments by $359.27.

Option B: A $25,000 home equity loan based on 7.8% APR amortized over a 10 year

term with monthly payments of $300.68. This reduces her monthly payments by

only $221.09.

Options	Loan Amount	Total Monthly Payment	Annual Percentage Rate, APR
Option A	$25,000	$162.50	7.8%
Option B	$25,000	$300.68.	7.8%

I. Under option A: After ten years of making monthly payments of $162.50 at 7.8% compounded monthly, what will be her remaining account balance? Use the TVM Solver to find the answer, and round to the nearest cent.

N=		Balance of the account after 10 years of payments: What type of loan is loan A? How much does Amanda pay to the loan company during the 10 years under Option A?
I=
PV=
PMT=
FV=
P/Y
C/Y
PMT	BEGIN END

II. Under option B: After ten years of making the monthly payments of $300.68 at 7.8% compounded monthly, find the remaining account balance; round your answer to the nearest cent.

N=		Balance of the account after 10 years of payments: How much does Amanda pay to the loan company during the 10 years under Option B?
I=
PV=
PMT=
FV=
P/Y
C/Y
PMT	BEGIN END

III. Option C Assume Amanda rejects both Options A and B and decides to continue making her current monthly payments.

a) How many months will it take to pay off each of the original loans?

Bank Card TVM Solver: N = I% = PV = PMT = FV = P/Y = C/Y = Pmt End

Auto Loan TVM Solver: N = I% = PV = PMT = FV = P/Y = C/Y = Pmt End

Department Store Card TVM Solver: N = I% = PV = PMT = FV = P/Y = C/Y = Pmt End

2. How much in total will she pay for each loan? Put your answers in column 6 in the table below along with the corresponding number of months that she has to pay each loan until it is paid off. What is the grand total amount paid on all three loans? Enter this number in the table also.

Loan Type	APR	Loan Amount	Monthly Payment	Number of months paying off the loan	Amount Paid
Bank Card	18%	$10,000	$203.21
Auto Loan	5.5%	$12,500	$238.76
Department Store Card	15%	$ 2,500	$ 79.80
TOTALS		$25,000	$521.77	Grand total paid:

7. Use your favorite spreadsheet application to write down the amortization schedules for each loan, under option C (pay all loans without a consolidation plan). Attach those amortization schedules to your project.

8. What should Amanda do? Develop a good option D for Amanda. Should she take option A, B or C? Is there maybe a better financial solution for her to become debt free? Advise Amanda on what she should do and explain why your recommendatio

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