1. A P3000 loan was originally made at 8% simple interest for 4 years. At the end of this period the loan was extended 3 years, without the interest for 4years. At the end of this interest rate was made 10% compounded semi-

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Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.