18 15 How is the changing age structure of the population likely to affect

18 15 how is the changing age structure of the

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18-15. How is the changing age structure of the population likely to affect consumer loan programs? What other forces are reshaping household lending today? As people grow older, especially beyond the age of 40 or 45, they tend to make less use of credit and to pay down outstanding debt obligations. This suggests that the total demand for consumer credit per capita may fall, forcing banks and other consumer lenders to fight hard for profitable consumer loan accounts. 18-16. What challenges have U.S. bankruptcy laws provided for consumer and those lending money to them? Recent changes in U.S. bankruptcy laws present serious challenges to consumer lending institutions. Congress passed the Bankruptcy Reform Act in 1978, amending a federal bankruptcy code that had stood since the turn of the century. While amendments in 1984 tightened up some of the loopholes in the 1978 law, the most recent reforms tipped the legal scales substantially in favor of individuals filing bankruptcy petitions and more severely limited the amount and kinds of debtors' assets that could be converted into cash for distribution to banks and other creditors. However, the Bankruptcy Abuse Prevention and Consumer Protection Act was signed in April of 2005. This law is likely to make it more difficult, expensive and time consuming to file for bankruptcy. Consumers must complete a credit counseling program before becoming eligible for filing bankruptcy and a ‘means test’ has been added. This test will let consumers know whether they are eligible to file for Chapter 7 bankruptcy which wipes out most debt or whether they will have to file Chapter 13 which requires them to have a court approved repayment plan for their outstanding debt. 18-21. What differences exist between ARMs and FRMs?
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An ARM is a mortgage whose interest rate changes over time, usually based upon changes in some base or reference rate. A FRM is a mortgage whose interest rate does not change with current market conditions. 18-22. How is the loan rate figured on a home mortgage loan? What are the key factors or variables? The best way to figure out the affordability of a home mortgage loan is to calculate the required monthly mortgage payment. This is a time value of money calculation and the payment depends upon the loan principal, the interest rate, and the length of the mortgage loan. 18-23. What are points? What is their function? Points are an additional charge up front in which each point to be paid equals one percent of the face value of the loan. Requiring the borrower to pay something extra over and above the interest owed on the loan, enable the lending institution to earn a higher effective interest rate.
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  • Fall '16
  • Thu Trang
  • Debt, Financial services, Mortgage loan, Deposit account

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