Chapter 9 (Personal Loans) Flashcards
What are the types of financial institutions?
- commercial banks
- savings institutions
- credit unions
- finance companies
In the personal loan process, the application process requires:
- personal balance sheet
- personal cash flow statement
a contract that specifies the terms of a loan, as agreed to by the borrower and the lender
- amount of the loan
- interest rate
loan contract
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
amortize
the life or duration of the loan
maturity
- lower maturity equals lower payments, but more interest is paid over the life of the loan
assets of a borrower that back a secured loan in the event that the borrower defaults
collateral
a loan that is backed or secured by collateral
secured loan
a loan that is not backed by collateral
unsecured loan
a rate that measures the finance expenses (including interest and other expenses) on a loan annually
annual percentage rate (APR)
interest on a loan computed as a percentage of the existing loan amount (or principal)
simple interest
the higher the interest rate, the higher the…
payment
a method of determine the monthly payment on a loan
add-on interest
a loan provide to finance part of the expenses a student incurs while pursuing a degree
- loan may be proved to either the student or the student’s parents
- repayment typically deferred until student is out of school
- interest may be tax deductible
student loan
a loan where the equity in a home serves as collateral for the loan
home equity loan
the market value of a home minus the debt owed on the home
equity of a home
