Ch. 6

34

# million people are unbanked or underbanked

63

#% of the US population does not have the cash on hand to cover an unexpected $500 to $1,000 emergency

Federal Grants

Award: A cash award paid to the school on behalf of the student. Grant funds in excess of school expenses are paid to the student

Federal Work Study

Award: School-based employment that is subsidized by the federal government. Students generally work on campus

federal student loans

Award: no credit check requires. can be used to pay for school and living expenses

obtain negotiate

Buying a car: --_____ an estimate for auto insurance --______ a purchase price

replaced

Eventually, use assets, such as automobiles, will no longer work well and will need to be...

Making a large down payment Paying down the mortgage loan

Housing equity is built in three ways: •_______ _____ _____ ___________ ______, minimizing the loan •_____ _____ ____ ____ ___, by making extra payments on the principle •When housing prices in the area increase, time is on your side

$1,000 - $2,000 borrow mainstream financial institution Work more hours sell

How to Avoid Expensive Loans: --Have an emergency fund - save between $_____ - $______ --_________ the money from family or friends --Obtain a loan from a bank, credit union, or other _______ ______ ________ --________ ______ ______to increase pay --______ something of value

foreclosure

If the homeowner does not make the monthly mortgage payments, then the lender can take possession of the house and sell it to another buyer in a process known as...

3 good faith estimate (GFE)

It is best to get at least ____ quotes from different lenders to make sure you are getting a fair rate. Each will give you a ______ _____ ____ with the following details: •Loan type •Loan amount •Interest rate •Expected monthly principal and interest payment •Closing costs, which include all of the associated loan fees associated with buying a house

2-week

Limit your loan shopping to a ____ _____ period to minimize the impact of multiple credit inquiries. •Every time a car dealer runs a credit report on you (they often do this before allowing you to take a test drive), this shows up on your credit report

unsecured loan

Not backed by collateral •Sometimes called signature loans •Considered to be riskier than secured loans and therefore charge a higher interest rate

three

Obtain at least ______ loan offers (preapprovals) from different banks and credit unions before going to a dealer

alternative Mainstream lenders

Offer traditional loan products, and rely heavily on each borrower's credit report and credit score when deciding whether to approve a loan

savings cash cash, loan

Options for buying a car: •Withdraw the money directly from ____ and pay ____ for the car •Use a combination of _____ for a down payment and borrow the remainder with a ______ •Borrow the entire purchase price of the car with a loan

Cash Advances Ask advance Contact

Options: ______. ______ - from credit card ______a friend or family member for a loan Request an ________ on his paycheck _______ the companies he owes money to, explain his situation, and ask for a modification to his billing plans

The interest rate The loan term or repayment period

Other variables that determine the loan amount you qualify for (2)

collateral

Pawn shops and title loan companies base their loan on the value of___________ -- - something the lender can sell if you don't repay the loan

transportation needs afford Shop Research auto insurance

Purchasing an Automobile: Determine your _______ ______ Calculate how much you can ______ _____ for a loan if you plan to borrow money ________ specific vehicle models •---Identify those that best meet your needs and budget Obtain an estimate for ______ ______ •---For the specific vehicle you want to purchase ______ the specific vehicle you will purchase •---Negotiate a purchase price

6 months

Repayment of federal student loans typically must begin within _____ ______ of completing school or when students drop below half-time status.

How much can you afford?

Review your monthly budget and determine your excess cash flow each month after contributing to savings and paying your bills.

payday loans

Short-term loan designed to be repaid within a few weeks when the borrower receives a paycheck. --if the loan isn't paid back, the lender will attempt to cash the check

28

Some mortgage lenders require housing expenses to be less than ___% of household income

31

The Federal Housing Authority (FHA) recommends homeowners not spend more than______% of their monthly income on housing expenses

fees

The annual percentage rate (APR) on a payday or alternative loan is based on _______ rather than a stated interest rate.

lowest interest rate

The key variable to negotiate in an auto loan is the ______ _____ _____ possible

FAFSA school lender

The process of Federal financial Aid: application via ____ Award via_____ repayment to the ______

43 36

Total Fixed Payments-to-Income Ratio: Also recommended by the FHA, and should be less than____%, is the sum of the monthly housing payments plus all other monthly debt payments divided by total monthly income --some mortgage lenders require this ratio to be lower, at __%

Direct subsidized loans Direct unsubsidized loans Direct PLUS loans Direct consolidation loans

Types of Federal Student Loans (4)

•Secured loan •Unsecured loan •Installment loan •Personal line of credit •Deposit advance •Peer-to-peer (P2P) lending

Types of personal loans (6)

alternative lenders

Typically don't rely on an individual's credit report when making a loan decision

mortgage

a special type of loan that is secured by land and all improvements on a piece of land, including a personal residence.

Total Fixed Payments-to-Income Ratio

aka the back-end mortgage qualification ratio

Housing Payments-to-Income Ratio

aka the front-end mortgage qualification ratio To calculate this ratio, add together all of the monthly housing payments and then divide this amount by total gross monthly income (before taxes are taken out

Peer-to-peer (P2P) lending

allows a borrower and lender to come together via the Internet, such as Lending Club®, Peerform®, and Prosper®. •Allows people 18 years of age or older to enter their personal information •Each service provider creates a "lending score" that is driven by a borrower's credit report •Those who have at least a 650 credit score can then ask lenders (known as investors) for a loan •Loans can range from $1,000 to $40,000 Interest rates vary but generally do not exceed 32% APR.

Direct PLUS Loans

are available to graduate and professional students. •Also available to parents of undergraduate students •Interest is calculated on the loan balance until they're no longer attending school and payments begin •Students don't need to show financial need to receive these loans

Direct Subsidized Loans

are federal student loans made to undergraduate students who demonstrate a financial need. •If student is enrolled in school for more than half-time, interest on these loans is paid by the federal government •These loans are the best value if you have toborrow

Direct Unsubsidized Loans

are made to undergraduate, graduate, and professional students. •Interest is calculated on the loan balance until payments begin—which is usually 6 months after graduation - and continues throughout repayment •Students don't need to show a financial need to receive these loans

lease payments

are much lower than loan payments, and you get to drive a new car every few years

mainstream lenders examples

banks credit unions auto manufacturer financing credit card issuers merchant credit cards

Real estate agents

can represent the buyer, the seller, or both •Their experience can be quite helpful, especially when making an offer on a house

3

car lease is typically around ____ years

alternative lenders examples

check cashers payday lenders title loans pawn shops seller-financed used car loans

human capital

college can be expensive, bit it is an investment in your ______ _____

deposit advance

is a short-term loan that is automatically repaid when the next qualifying electronic deposit is made (such as the next paycheck). •The borrower must have a checking account and a history of regular electronic deposits of paychecks, federal benefits, or other deposits •When a loan is needed, the borrower pays the bank approximately $10 for every $100 borrowed The borrower then has 35 days to pay back the loan

reletting fee

is if you move out before the lease termination to cover the cost of renting the apartment again

security deposit

is money paid in advance to cover the cost of excess damage

housing equity

is the difference between what a house could sell for and the amount still owed on the mortgage

personal loans

is typically a small-dollar debt that can be used to pay bills or make purchases

pet deposit

is used to help offset damages caused by any pets

examples of unsecured loans

lines of credit credit cards student loans payday loans

Direct consolidation loans

loans allow students to consolidate all of their federal student loans into one easy-to-manage loan.

secured loans

loans backed by collateral •Property (such as a car or valuable item) that can be taken by the lending institution if the borrower fails to repay the loan

personal line of credit

looks similar to credit cards; allowing the borrower to maintain a revolving balance month to month. •Usually unsecured •The bank informs the borrower how much may be borrowed in total •The borrower is given a debit card or a checkbook •The borrower can then access the line of credit as needed •Interest is only paid on the money borrowed

•Estimate Affordability •Work / Work Study •Scholarships / Grants •Family contributions •Savings •Federal student loans

options to pay for college (6)

renter's insurance

pays for any lost, damaged, or stolen property

housing wealth

represents more than half of many American's total wealth

use assets

something that supports the current level of living of an individual or household, tend to go down in value (depreciate)

mortgage loan officer

specializes in mortgages and can help you get preapproved for a loan

installment loans

the borrower receives the full amount of the loan upfront in a single lump sum. •The interest rate is usually fixed •The payback period is fixed (in contrast to credit cards) •Repayment periods generally from 1 to 5 years

automobiles

the most popular use assets

lower the interest rate longer the loan term

the...., the more you can borrow

pawn shops

typically provide a longer period to pay back a loan, but they give less of a loan compared to the value of the collateral.

application deposit

used in case your application is accepted and you decide not to move in

Examples of secured loans

vehicle loans mortgage loans deposit advances car title loans pawn shop loans

15, 20 or 30

•Generally, mortgages have long repayment periods, most commonly ____, ____, or ___ years

tax-deductible

•One benefit associated with all types of student loans—including federal student loans—is that the interest you pay may be ______. _______

grace period.

•The 6-month period is referred to as the ______ _____

capped

•The annual amount a student can borrow under both the direct subsidized and direct unsubsidized loans is _______

preapproved

•To be __________- for a loan means the lender has verified your credit, income, tax history and other important facts and has indicated how much you are able to borrow