SHOW SOLUTION Mr. Jones borrowed P 20,000 from a lending firm and an additional P 5,000 after 2 months.  He paid P 10,000 after 1 year and an additional payment of P 12,000 at the 18th month.  The lending firm demanding Mr. Jones to pay all at the end of 2 years.  If interest is 12% compounded monthly, how much will Mr. Jones pay at the end of 2 years. Note:  The reference of all the time is the time P20,000 is borrowed.

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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.