Borrowing & Payment Plans (SQA National 5 Applications of Mathematics): Revision Note

Borrowing & payment plans

What are different forms of borrowing?

• You can borrow money by:

  • taking out a loan

  • using credit cards or store cards

  • using credit agreements

• You will need to pay interest on the amount you borrow

What is a payment plan?

• You can pay for a product or repay borrowing using a payment plan

• A payment plan can include:

  • A deposit paid upfront

  • Monthly instalments of equal amounts

  • A final payment of a fixed amount

How do I calculate the total price of a payment plan?

• You might be told the fixed amount of interest in the question

  • Add this to the amount borrowed

• You might be told that the payment plan is a certain percentage more than the advertised price

  • Increase the advertised price by the percentage

How do I calculate the cost of each monthly instalment of a payment plan?

• STEP 1
  Calculate the total price of the payment plan

  • This usually involves increasing an amount by a percentage

• STEP 2
  Subtract the deposit and final payment (if applicable)

  • This usually involves finding a fraction of an amount

• STEP 3
  Divide the remaining amount by the number of months