4. Leigh’s parents were in an auto accident, and she needs quick money to fly home. She doesn’t have enough in her account to pay for the $800 plane ticket, nor does she own a credit card. She hastily makes the decision to stop in at a title loan office. She gives them the title of her car as collateral to secure her 30-day loan of $1,000 at an interest rate of 25% per month.

She has a processing fee of $50 and a mandatory roadside service fee of $75. Her parents end up being hospitalized for three months. Leigh, tending to matters at home, extends the short-term loan twice more, paying only the interest for the first three months. However, the fees repeat with each rollover. At the end of three months, her parents are home from the hospital, and she shares her financial situation with them. (LO 5-4)

a. How much in interest did Leigh pay in three months?

b. If she chooses to pay off the loan in full after three months, what will the loan actually end up costing?

c. What is the resulting APR?

d. What are Leigh’s alternatives at this point?

e. What would have been Leigh’s alternative options for funding the airline ticket on such short notice besides a title loan?