LOANS Flashcards
is a form of debt incurred by an individual or other entity, then the lender—usually a corporation, financial institution, or government—advances a sum of money to the borrower. in return, the borrower agrees to a
certain set of terms
LOAN
a loan can be categorized as either a ___________ or a ________________
BUSINESS LOAN or a CONSUMER LOAN
are money lent specifically for a business purpose. it may be used to start or expand a business
BUSINESS LOAN
are money lent to an individual for personal or family purposes. these loans can be used to purchase items like cars or secure house and lots
CONSUMER LOAN
is an asset used to secure a loan. it may be a real-estate or other investments as a guarantee for payment
COLLATERAL
is the period to pay the entire borrowed amount
TERM OF THE LOAN
the process or method of paying for a loan (principal and interest included). this is often done on an installment basis with equal amounts of payment at regular intervals.
AMORTIZATION
a type of loan secured by a collateral that the borrower is obliged to pay at specified terms
MORTGAGE
a mortgage on a movable property
CHATTEL MORTGAGE
remaining amount of debt left unpaid at a specified period
OUTSTANDING BALANCE
two formulae for mortgage amount
Cash value − down payment;
Cash value x Financed rate
a method of computing for the outstanding balance
PROSPECTIVE METHOD
method that pertains to getting the present value of all remaining payments
PROSPECTIVE METHOD
used to denote the outstanding balance after k payments
Bk
outstanding balance computes for the payments after _ within the term _.
k; n
formula for finding the outstanding balance
Bk = R ( ( 1 - ( 1 + j ) ^ -( n - k ) ) / j )
where:
(n - k) is the remaining payments to be made
n - total number of payments
k - number of payments already made
in computing the outstanding balance of the 51st payment (not after the 51st payment), k is equal to what
50
how do you find the interest component of a regular payment after a particular payment
multiply the interest rate per period to the outstanding balance
how do you find the principal component of a regular payment after a particular payment
subtract the interest component from the regular payment
symbol for interest component and principal component
I sub (k+1);
PR sub (k+1)
where:
k is number of payments already paid
if 20% is the down payment, the rest of 80% is called
FINANCED RATE
