Interest and Discount Points and Loan Repayment

Question 1

Amortized Loan

Answer 1

The liquidation of a financial obligation on an installment basis, which includes both principal and interest

Question 2

Balloon Payment

Answer 2

A note’s final installment payment, which is greater than the preceding payments and pays the note in full

Question 3

Budget Loans

Answer 3

When the borrower is forced to put away money in trust for the payment of the property taxes and insurance

Question 4

Direct Reduction Loan

Answer 4

Constant principal reduction plus the interest due on the unpaid balance

Question 5

Discount

Answer 5

A charge made by lenders to increase the effective rate of interest (yield) from the stated interest rate on the note

Question 6

I = P x R x T

Answer 6

Formula for calculating interest.

Interest equals principal times rate times term

Question 7

Installment Loan

Answer 7

A loan that allows payment over an extended period of time

Question 8

Interest Rate Buy-Downs

Answer 8

A reduction of the interest rate stated on the note by payment of points at the time of loan funding

Question 9

Legal Rate

Answer 9

The rate of interest allowed by law when an obligation or court-ordered judgement does not state a rate of interest on the obligation due; the legal rate of interest in Arizona is 10 percent.

Question 10

Partially Amortized Loan

Answer 10

A loan that begins with amortized payments but ends with a balloon payment

Question 11

PITI

Answer 11

A type of payment (principal, interest, taxes, and insurance)

Question 12

Point

Answer 12

1 percent of the loan paid the lender or the lender’s agent at the time the loan is made

Question 13

Usury

Answer 13

Charging at a higher interest rate than allowed by law