Tim and Sally are taking out a personal loan to pay for their wedding expenses. The loan is for $9,000 and comes with an interest rate of 9.5% compounded monthly. The couple wants to pay the loan off as quickly as possible, keeping the monthly payments below $250. The lender offers repayment plans in 12 month increments. How long of a loan should they request?

Use the fixed-payment loan formula with monthly interest rate 0.095 ÷ 12. For 36 months, the payment is about $288 per month, which is above the $250 limit; for 48 months, it is about $226 per month. Since the 48-month plan is the shortest offered plan that keeps payments below $250, they should request the 48-month loan.

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