Overview of Loans
Ramon took out a car loan with an interest rate of 10 percent and paid $100 in loan application fees. What term describes the amount of interest Ramon will pay? down payment capacity APR capital
APR
Which of the following loans will have a higher total cost? A loan for $5,000 at 3.5 percent over a loan period of four years. A loan for $5,000 at 3.5 percent over a loan period of six years.
a loan for $5000 at 3.5 percent over a loan period of six years
unsecured loans
a loan in which the individual does not offer collateral; sometimes called personal or signature loans
secured loans
a loan in which the individual offers collateral; if the loan is not paid back as agreed, the individual gives up the collateral to the lender
installment loan
a loan that is repaid in equal monthly payments for a specific period of time
co-signer
a person who signs a loan with another individual
collateral
a piece of property that a person promises to give to the lender if a loan is not paid
The difference between a secured loan and an unsecured loan is _____. an unsecured loan requires a cash down payment and a secured loan does not a secured loan requires a co-signer and an unsecured loan does not a secured loan requires a cash down payment and an unsecured loan does not a secured loan requires collateral and an unsecured loan does not
a secured loan requires a collateral and an unsecured loan does not
variable rate
an interest rate that may change during the repayment period
fixed rate
an interest rate that remains the same throughout the entire loan repayment period
In one or two sentences, describe how a person can calculate his monthly payment for a loan.
calculate the monthly loan is the down payment a personal has to pay. there are numerous sites that have a loan payment calculators
What are the 4 C's of lending? capacity, company, character, and co-signer capital, co-signer, character, and collateral capacity, capital, character, and collateral company, capital, character, and collateral
capacity, capital, character, and collateral
If the principal on one loan is $1,000 more than another loan, the total cost of the loan is $1,000 more. True False
false
character
how responsible you have been in the past with credit; information from your credit report
capacity
the ability to make payments based on amount of income and other bills
loan repayment period
the time it will take to repay the loan
If you must apply for a loan, you should _____. contact a broker and provide certain loan information visit a loan officer at a financial institution and complete an application call your credit card company and answer questions over the phone run a credit report and send it to a loan officer
visit a loan officer at a financial institution and complete and application
capital
your net worth; the value of the items you own and the cash you have available