Chapter 9a - Personal cash flow statement Loan contract a...

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Chapter 9: Personal Loans Chapter Objectives Provide a background on personal loans Outline the types of interest rates that are charged on personal loans Discuss car loans Explain how to decide between financing the purchase of a car and leasing a car Describe the key features of student loans Describe home equity loans Background on Personal Loans Usually obtained to finance a large purchase Has a specific repayment schedule Determining whether a loan is sensible Consider the sacrifice you may have to make to pay off the loan Avoid if your source of income is questionable Background on Personal Loans (cont’d) Do you have alternative sources of funds to repay the loan if you lose your job? Sources of loans Commercial banks, savings institutions, finance companies, credit unions, some automobile manufacturers, friends, or family members Background on Personal Loans The personal loan process Application process Personal balance sheet
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Unformatted text preview: Personal cash flow statement Loan contract: a contract that specifies the terms of a loan, as agreed to by the borrower and the lender Amount of the loan Interest rate • Background on Personal Loans (cont’d) Loan repayment schedule Amortize: to repay the principal of a loan through a series of equal payments Each payment includes part of the principal and part of the interest Maturity: the life or duration of the loan Longer maturity equals lower payments, but more interest is paid over the life of the loan • Background on Personal Loans (cont’d) Collateral: assets of a borrower that back a secured loan in the event that the borrower defaults Secured loan: a loan that is backed or secured by collateral Unsecured loan: a loan that is not backed by collateral Payday loan: a short-term loan provided in advance of a paycheck Cosigning is sometimes required if credit history is weak...
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Chapter 9a - Personal cash flow statement Loan contract a...

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