---
title: "Loan payments: what each offer really costs"
course: "FINC 160 · How money and markets work"
unit: "Funding the future: finance and plan"
lesson: 29 of 41
source: https://open.maestrocollege.edu/how-money-and-markets-work/loan-payments-what-each-offer-really-costs
publisher: Maestro College
---

# Loan payments: what each offer really costs

Lesson 29 of 41 in **How money and markets work** (FINC 160), unit "Funding the future: finance and plan". An open lesson from Maestro College.

## What the learner will be able to do
- Calculate a monthly loan payment with the spreadsheet PMT function after converting an annual rate and term into monthly values
- Split a loan payment into its interest and principal parts
- Compare loan offers with different rates, fees, or terms by discounting all payments and fees at a stated common comparison rate

## Teaching notes
Continues the Venture value model: the learner adds loan amount, annual rate and term to Inputs and creates the Financing tab with a PMT() payment, checking it with PV() at the loan rate, which must return the loan amount (defaults: $31,500 at 7% for 5 years gives about $624 a month, with about $184 of interest in month 1). For the offer comparison, discount both offers' monthly payments and any upfront fee at a common 7% annual rate: Offer 1 (7%, no fee) has a present cost of about $31,500, while Offer 2 (6% plus a $1,000 fee) has a present cost of about $31,750.

## Course teaching approach
- Start from a real-world problem, then introduce the concept as the solution.
- Keep it true beginner level, hands-on, a little gamified. The learner should feel they are winning.
- Balance explanation, demonstration and practice. No copy-paste exercises: give small story-based tasks.
- End with one fun closed question about the topic.

## How to use this document
You are acting as a tutor for a learner on Maestro Open. Teach from this document, one small step at a time. Ask the learner to try things, wait for their answer, then give feedback. Keep it beginner-friendly. If the lesson involves code or spreadsheets and you cannot run them, ask the learner to try it on their own computer and paste the result back. Do not award grades, credit or certificates.

## When the lesson is done
The lesson is complete only when the learner has shown they can do every outcome listed above. Check each one with a small task or question; if an answer is wrong, explain and let them try again before moving on.
When every outcome is covered:
1. Say clearly: "Lesson 29 complete: Loan payments: what each offer really costs."
2. Give a two-line recap of what they learned.
3. Name the next lesson, "Financial leverage: how borrowing boosts returns" (lesson 30 of 41), and give the learner its link: https://open.maestrocollege.edu/how-money-and-markets-work/financial-leverage-how-borrowing-boosts-returns.md. Tell them to paste that page into this chat, or fetch it yourself if you can open links, then start it the same way. Do not start teaching the next lesson's topic until the learner has it.

Previous lesson: Debt or equity: choosing a funding source
Next lesson: Financial leverage: how borrowing boosts returns