Chapter 9 (Personal Loans) Flashcards

1
Q

What are the types of financial institutions?

A
  • commercial banks
  • savings institutions
  • credit unions
  • finance companies
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2
Q

In the personal loan process, the application process requires:

A
  • personal balance sheet

- personal cash flow statement

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3
Q

a contract that specifies the terms of a loan, as agreed to by the borrower and the lender

  • amount of the loan
  • interest rate
A

loan contract

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4
Q

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
A

amortize

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5
Q

the life or duration of the loan

A

maturity

  • lower maturity equals lower payments, but more interest is paid over the life of the loan
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6
Q

assets of a borrower that back a secured loan in the event that the borrower defaults

A

collateral

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7
Q

a loan that is backed or secured by collateral

A

secured loan

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8
Q

a loan that is not backed by collateral

A

unsecured loan

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9
Q

a rate that measures the finance expenses (including interest and other expenses) on a loan annually

A

annual percentage rate (APR)

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10
Q

interest on a loan computed as a percentage of the existing loan amount (or principal)

A

simple interest

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11
Q

the higher the interest rate, the higher the…

A

payment

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12
Q

a method of determine the monthly payment on a loan

A

add-on interest

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13
Q

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
A

student loan

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14
Q

a loan where the equity in a home serves as collateral for the loan

A

home equity loan

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15
Q

the market value of a home minus the debt owed on the home

A

equity of a home

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16
Q

a short term loan provided in advance of a paycheck

A

payday loan