Consumer Loans - Staunton River High School

Report
17- CONSUMER LOANS
Borrowing Money
Personal Loans
Financing a Car
Leasing vs. Buying a car
Applying for a Loan
Simple contracts
Consumer Loans
• Why is the interest rate of a loan
one of the most important things
to consider when shopping around
for loans?
• Drastically change the total
amount
• More you pay
• Have to think about it
• How does Truth In Lending protect
consumers when shopping for a
loan?
• Protected from harm
• Disclosure of interest rate
• Make a good choice on a good
deal
Consumer Loans
• Loans can be used for:
• Car
• College
• House
• Interest- The difference between
the amount paid over the lifetime
of a loan, that is compounded n
times in a given year, and the
principal amount borrowed is
defined as the interest.
• Service Charge- A service charge is
the sum of lender fees for taking
out a loan.
Consumer Loans
• Finance charge is the total cost of
taking out a loan, which includes
the interest paid over the lifetime
of the loan and any service fees
applied by the lender.
Consumer Loans
• Carter borrowed $5,000 on 3 year loan at 12% interest. His monthly
payments were $166.07. How much did Carter pay in interest?
• Total cost= (166.07)(12)(3) = $5,978.52
• Interest = 5978.52 – 5,000
• = $978.52
Consumer Loans
• Interest + Service Charge = Finance Charge
Calculate finance charges
Monthly
PERSONAL LOANS
College?
House?
Etc?
WHAT KINDS OF
LOANS DO YOU SEE
YOURSELF HAVING IN
THE FUTURE?
Personal Loans
• When taking out a personal loan,
why is it important to take out the
least amount of money necessary?
• When compared to a home equity
loan or mortgage, why is a
personal loan not the best choice?
• Higher interest rate
• If there was extra principal to be
paid the interest to be paid would
be higher
• Unsecure
• Collateral
• Higher interest
Personal Loans
• secured loan is a loan that is
backed by some form of collateral
provided by the borrower.
• unsecured loan is a loan that is not
backed by any form of collateral
• Repayment is the process of
paying back borrowed money.
Personal Loans
• Collateral is an asset that a
borrower pledges to a lender in
order to secure a loan.
• Finance charge is the total cost of
taking out a loan, which includes
the interest paid over the lifetime
of the loan and any service fees
applied by the lender.
Personal Loans
• Calculating the Monthly
payments:
• Determine the monthly
payment of a $4,500 loan at
12% interest for 48 months.
• PV- $4,500
• i- 0.12
• N-48
Personal Loans
• Calculating the Finance Charge
• (118.50) (48) = $5688
• Determine the monthly payment
of a $4,500 loan at 12% interest for
48 months.
• $5688 – 4500 =
• Using collateral
• $1188
What is your dream car?
Make?
Model?
Year?
Style?
CARS
http://youtu.be/mTiy6sVnBqU
FINDING A CAR
Finding a Car
• You found your new car. Now
what?
• Amortization is the reduction of a
debt over time by making periodic
payments, of which, a portion of
each payment goes towards the
principal and the interest.
• title is a document provided by a
qualified source stating a legal
claim of ownership over real and
personal property.
Finding a Car
• Why is the APR (Annual
Percentage Rate) considered the
most important factor to be
mindful of in a car loan?
• Determine True cost
• Compare loans
• Choose right advantage
• When is taking a zero percent APR
option more beneficial than a large
rebate?
• If you save over the course of a
loan
• Greater than an instant rebate
Finding a Car
• Auto insurance is insurance
purchased by the owner of a
vehicle to cover losses due to
traffic accidents or theft
• Vehicle registration is the process
of registering a vehicle with a
government authority.
Finding a Car
• Typical Base price of a vehicle is
around $15,000
• Say you place a down payment of
20% with sales tax of 7.1%
• $15,000 * 0.20 = $3,000
• 15,000 * 0.071 = $1,065
• registration fees - $1,470
• documentation fees $59
• You end up totaling $17,594 in
Financing you new car.
Finding a Car
How are you going to pay for your
car?
LEASING OR BUYING A
CAR
Leasing vs. Buying a Car
• If a person wanted to purchase
their dream car, and keep it for
many years, should they lease or
buy? Why?
• Buy it
• Paid off
• Less overall
• What is a disadvantage to having a
limited number of miles in your
lease contract?
• If you drive more than the mileage
given
• You don’t get credit for any
mileage not used.
Leasing or buying a Car
• lease is a contract stating, from
one individual to another, the
terms of use of real or personal
property for a designated period
of time in return for payment or
other forms of compensation.
• Depreciation is the decrease in the
value of real or personal property
over a period of time.
• Security deposit is an up-front cash
payment to protect the dealer
from damage to the vehicle and is
refunded to the borrower at the
end of the lease.
Leasing or buying a Car
• Vehicle registration is the process
of registering a vehicle with a
government authority.
• Acquisition fee is an administration
fee charged by the leasing
company.
• disposition fee, set by the car lease
company, is due at the end of the
lease to compensate the leasing
company for the expense of selling
or otherwise disposing of a
vehicle.
Leasing vs. Buying a Car
• Money factor is the interest rate
the lease is based upon. It is
computed by dividing the annual
percentage rate by 2400.
• Residual is the value of the car at
the end of the lease term.
Leasing vs. Buying a Car
• Jennifer is leasing a car from a
local auto retailer. The terms of
the lease include a 9% interest rate
for 36 months with a residual value
of 57%. The MSRP for the car
Jennifer is leasing is $17,500. What
will Jennifer’s monthly lease
payment be?
a.
b.
c.
d.
$93.84
$99.75
$209.03
$312.06
Leasing vs. Buying a Car
APPLYING FOR A
LOAN
Applying for a Loan
• Complete the following:
• Own Home?
• Rent?
• You the owner?
• How many bedrooms?
• How many bathrooms?
• Man-Cave or Trophy room?
Applying for a Loan
• Why is credit history such an
important part about being
considered for a loan?
• How would a bigger down
payment be beneficial to
borrowers?
• Responsibility
• Make payments
• On time
• Money toward principal
• Decrease monthly payment
Applying for a Loan
• Debt-to-income ratio is a personal
finance measure that compares an
individual's debt payments to the
income he or she generates.
• Credit score is a numerical value of
a person's credit files that directly
relates to an individual’s
creditworthiness.
• Credit history is a detailed record
of an individual’s borrowing and
repayment history, including
information regarding late
payments or bankruptcy.
Applying for a Loan
• Collateral is an asset that a
borrower pledges to a lender in
order to secure a loan.
• cosigner is a person that pledges
to pay off the debt of an
individual, for which they have
cosigned, in the event that the
borrower is unable to pay off the
debt.
Applying for a Loan
•
•
•
•
•
Request a credit report
Resolve past due accounts
Apply for a lower loan amount
Pay down some of your debt
Have a cosigner apply for the loan
with you
• Try applying at a different bank
• Things to take into consideration:
1.
2.
3.
Monthly debt payments
Monthly income
Debt to income ratio
What make a contract official?
SIMPLE CONTRACTS
Simple Contracts
• A loan agreement is a document
that details the conditions of the
loan as agreed upon by the lender
and the borrower.
• Consideration is a legal obligation to
exchange services or goods as
stated and agreed upon
contractually by all party members
associated with a contract.
• Meeting of the minds is the act of
reaching a common understanding
between all members associated
with a contract regarding the terms
and conditions under which the
contract is established.
Simple Contracts
• A written contract is a contract that
states, in writing, the terms and
conditions in which an individual
agrees upon to enter into a
contractual agreement.
• An oral contract is a contract that
presents its terms and conditions
and the agreement of these terms
and conditions orally, rather than in
writing.
• A penalty is an act imposed, by one
party member onto another in a
contractual agreement, when a
failure to meet the terms and
conditions of the contract occurs.
Simple Contracts
• Why is understanding the terms of
a contract important for both
parties involved?
• Certain of obligations
• Aware of penalties
• What elements are required for a
legally valid contract?
• All parties must agree
• Exchanged promises
• Some of value to exchange
• Money
• http://youtu.be/of8UgykfUbw
• Japan business etiquette
• Products
• Services
• Etc.
TOPIC TEST

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