takes out a $6,000$6,000 personal loan to make home repairs. His interest rate is 12%12% on a 44-year loan. His monthly payments are $15

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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.