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