consumer loan.
Pick an appropriate source for your loan.
Get the most
favorable interest rate possible on a loan.Know when to borrow.
Control your debt.
Разделы презентаций
- Разное
- Английский язык
- Астрономия
- Алгебра
- Биология
- География
- Геометрия
- Детские презентации
- Информатика
- История
- Литература
- Математика
- Медицина
- Менеджмент
- Музыка
- МХК
- Немецкий язык
- ОБЖ
- Обществознание
- Окружающий мир
- Педагогика
- Русский язык
- Технология
- Физика
- Философия
- Химия
- Шаблоны, картинки для презентаций
- Экология
- Экономика
- Юриспруденция
Chapter 7
Содержание
- 1. Chapter 7
- 2. Learning ObjectivesUnderstand the various consumer loans.Calculate the
- 3. Single-Payment Versus Installment LoansSingle-PaymentSingle lump-sum payment at
- 4. Secured Versus Unsecured Loans SecuredGuaranteed by a
- 5. Variable-Rate Versus Fixed-Rate LoansVariable-RateAdjustable rate tied to
- 6. The Loan ContractSecurity agreement states if purchased
- 7. The Loan ContractInsurance Agreement Clause Must purchase
- 8. Special Types of Consumer LoansHome Equity Loans
- 9. Special Types of Consumer LoansStudent Loans –
- 10. Special Types of Consumer LoansAutomobile Loans –
- 11. Cost and Early Payment of Consumer LoansTruth
- 12. Cost and Early Payment of Consumer LoansFinance
- 13. Payday LoansPayday loans:Given by check cashing companies.Aimed
- 14. Cost of Single-Payment LoansTwo ways loans are
- 15. Cost of Single-Payment LoansSimple Interest MethodInterest =
- 16. Cost of Installment LoansRepayment of both interest
- 17. Cost of Installment LoansSimple Interest MethodMost common
- 18. Early PaymentIf installment loan is repaid early,
- 19. Relationship of Payment, Interest Rate, and Term
- 20. Sources of Consumer LoansInexpensive sources:The least expensive
- 21. Sources of Consumer LoansMore Expensive Sources:Credit unions,
- 22. How and When to BorrowHow do you
- 23. How and When to BorrowBorrow If:After-tax cost
- 24. How and When to BorrowWhen you borrow
- 25. Controlling Your Use of DebtDetermine how much
- 26. Controlling Your Use of DebtDebt Limit Ratio
- 27. Controlling Your Use of Debt28/36 Rule A
- 28. Debt Resolution RuleDebt resolution rule helps control
- 29. What To Do If You Can’t Pay
- 30. What To Do If You Can’t Pay
- 31. Chapter 13: The Wage Earner PlanTo file
- 32. Chapter 7: Straight Bankruptcy Allows individuals who
- 33. Chapter 7: Straight Bankruptcy To qualify, you
- 34. Скачать презентанцию
Learning ObjectivesUnderstand the various consumer loans.Calculate the cost of a consumer loan.Pick an appropriate source for your loan.Get the most favorable interest rate possible on a loan.Know when to borrow.Control your
Слайды и текст этой презентации
Слайд 2Learning Objectives
Understand the various consumer loans.
Calculate the cost of a
consumer loan.
favorable interest rate possible on a loan.Know when to borrow.
Control your debt.
Слайд 3Single-Payment Versus Installment Loans
Single-Payment
Single lump-sum payment at maturity.
Pay back principal
and interest.
Have short maturities – less than 1 year.
Used as
a bridge or interim loan. Installment
Repayment of principal and interest at various intervals.
With each payment, the interest portion decreases and principal increases; called loan amortization.
Used for financing cars, and other big-ticket items.
Слайд 4Secured Versus Unsecured Loans
Secured
Guaranteed by a specific asset.
If loan
payments are not covered, the asset is seized.
Collateral reduces risk,
so lower interest rate.Unsecured
Requires no collateral.
Large loans given only to those with excellent credit.
Quite expensive, since lender only has the borrower’s promise to pay.
Слайд 5Variable-Rate Versus Fixed-Rate Loans
Variable-Rate
Adjustable rate tied to market interest rate.
Based
on prime rate or 6 month T-bill.
Borrower pays prime plus
additional percent.Adjust monthly or annually, has rate caps.
Borrower risks rate increase.
Fixed-Rate
Isn’t tied to changing market interest rates.
Maintains a single rate for duration of loan.
Most consumer loans are fixed.
May cost more than variable rate.
Lender risks rate increase.
Слайд 6The Loan Contract
Security agreement states if purchased item will be
used as collateral.
Note states payment schedule and rights of borrower
and lender if default.A note is standard on all loans, security agreement is standard on secured loans.
Слайд 7The Loan Contract
Insurance Agreement Clause
Must purchase insurance to pay
off loan if death.
Acceleration Clause
If one payment is missed,
entire loan is due immediately.Deficiency Payments Clause
If default on secured loan, lender reposes item and borrower is billed for difference if necessary.
Recourse Clause
Define lenders actions if default (attach wages).
Слайд 8Special Types of Consumer Loans
Home Equity Loans – secured loan
using equity in home as collateral.
Advantages:
Interest is tax deductible up
to $100,000.Carry lower interest than other consumer loans.
Disadvantages:
Puts your home at risk.
Limits future financing flexibility.
Слайд 9Special Types of Consumer Loans
Student Loans – low, federally subsidized
interest, based on financial need to those progressing towards a
degree.Federal Direct/Stafford Loans:
Federal government makes direct loan to student/parents through financial aid office.
PLUS Direct/PLUS Loans:
Loans are made by private lenders such as banks and credit unions to parents.
Слайд 10Special Types of Consumer Loans
Automobile Loans – loan secured by
auto.
Duration usually for 24, 36, or 48 months.
Low rates
used as marketing tool on slow selling vehicles.Repossession if default on loan.
Слайд 11Cost and Early Payment of
Consumer Loans
Truth in Lending Act requires
written notification of total finance charges and APR before signing.
APR
is the annual percentage rate showing the simple percentage cost of all finance charges over the life of the loan, on annual basis.
Слайд 12Cost and Early Payment of
Consumer Loans
Finance charges include all costs
associated with the loan:
Interest payments
Loan processing fees
Credit check fees
Insurance fees
Слайд 13Payday Loans
Payday loans:
Given by check cashing companies.
Aimed at those who
need money until their next “payday.”
Cost comes in form of
a fee - $20-$30 for a 1- or 2-week loan.Banned in some states.
Слайд 14Cost of Single-Payment Loans
Two ways loans are made:
Simple Interest Method:
Interest
= principal x interest rate x time.
Stated interest and APR
are the same.Discount Method:
Entire interest charge is subtracted from loan principal before receiving the money.
Pay entire principal amount at maturity.
Stated interest and APR will differ.
Слайд 15Cost of Single-Payment Loans
Simple Interest Method
Interest = principal x interest
rate x time
Stated interest and APR are the same.
Discount Method
Entire
interest charge is subtracted from loan principal before receiving the money.Pay entire principal amount at maturity.
Stated interest and APR will differ.
Слайд 16Cost of Installment Loans
Repayment of both interest and principal occurs
at regular intervals.
Payment levels are set so loan expires at
a preset date. Use either simple interest or add-on method to determine what payment will be.
Слайд 17Cost of Installment Loans
Simple Interest Method
Most common method of calculating
payments.
Monthly payments are the same, but portion to principal increases
over the loan.Add-On Method
Interest charges are calculated using original balance.
Charges are added to loan and are paid off over loan’s life.
Can be costly, should be avoided.
Слайд 18Early Payment
If installment loan is repaid early, determine amount of
principal still owed.
Most common method for add-on loan is Rule
of 78 or sum of the year’s digits.Rule of 78 determines what proportion of each payment goes towards principal.
Слайд 19Relationship of Payment, Interest Rate, and Term of the Loan
How
does the duration of loan and interest rate affect size
of payments?As interest rates rise, so do the monthly payments and finance charges.
Increasing the maturity will lower the monthly payments, but result in higher total finance charges.
Lenders charge a lower interest rate on shorter-term loans.
Слайд 20Sources of Consumer Loans
Inexpensive sources:
The least expensive source of funds
is your family.
Home equity loans and other secured loans are
inexpensive.Insurance companies that lend the cash value of life insurance policies also offer low rates.
Слайд 21Sources of Consumer Loans
More Expensive Sources:
Credit unions, S&L’s, and commercial
banks.
Exact cost depends on type of loan (secured or unsecured),
length of loan, and fixed or variable rate loan. Most Expensive Sources:
Retail stores, finance companies, or small loan companies.
Слайд 22How and When to Borrow
How do you get a favorable
rate?
Have a strong credit rating.
Loan must be relatively risk-free.
Use variable
rate loan.Keep loan short-term.
Provide collateral.
Apply large down payment.
Debt affects future financial flexibility.
Слайд 23How and When to Borrow
Borrow If:
After-tax cost of borrowing
after-tax lost return from using savings to purchase the asset.
Pay
Cash If:After-tax cost of borrowing > after-tax return from using savings for purchase.
Слайд 24How and When to Borrow
When you borrow to invest:
Hope to
receive an income stream that offsets the cost of borrowed
funds.Borrow with the goal of building wealth.
Earnings > cost of borrowed funds.
Слайд 25Controlling Your Use of Debt
Determine how much debt you can
comfortably handle.
This changes during different stages of life.
Earlier years,
debt builds up.Later years, income rises and debt declines.
Слайд 26Controlling Your Use of Debt
Debt Limit Ratio measures the percentage
of take-home pay committed to non-mortgage debt.
Total debt can be
divided into consumer debt and mortgage debt.Ratio should be below 15%.
Слайд 27Controlling Your Use of Debt
28/36 Rule
A good credit risk
when mortgage payments are below 28% of gross monthly income,
and total debt payments are below 36%.
Слайд 28Debt Resolution Rule
Debt resolution rule helps control debt obligation, excluding
borrowing for education and home financing, by forcing you to
repay all outstanding debt obligations every 4 years.Logic is that consumer credit should be short-term.
Слайд 29What To Do If You Can’t
Pay Your Bills
Go to creditors
to get help resolving your situation or see a credit
counselor.Consider using savings to pay off debt.
Use a debt consolidation loan to lower monthly payment and restructure debt.
Final alternative is personal bankruptcy.
Слайд 30What To Do If You Can’t
Pay Your Bills
Personal bankruptcy doesn’t
wipe out all obligations.
Chapter 13 The wage earner plan
Chapter 7
Straight bankruptcyChapter 11 For businesses or those exceeding debt limitations or lack regular income.
Chapter 12 Available to family farmers.
Слайд 31Chapter 13: The Wage Earner Plan
To file for Chapter 13,
you must have:
Regular income
Secured debts under $922,975
Unsecured debts under $307,675
Repayment
schedule is designed to cover your normal expenses while meeting repayment obligations. For creditors, it means controlled repayment with court supervision.
Слайд 32Chapter 7: Straight Bankruptcy
Allows individuals who don’t have any
chance of repaying debts to eliminate them and begin again.
While you will not lose everything, courts confiscate and sell most assets to pay off debts.
Some debts remain including child support, alimony, student loans, and taxes.
Слайд 33Chapter 7: Straight Bankruptcy
To qualify, you must pass a
“means test” and cannot file Chapter 7 bankruptcy if:
Income is
higher than median in your state.Have more than $100 in monthly disposable income.
Have sufficient disposable income to repay at least 25% of your debt over 5 years.
