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Loan To Own 1. 2 Purpose Loan to Own provides general information on installment loans, including:...

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Loan To Own 1
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Page 1: Loan To Own 1. 2 Purpose Loan to Own provides general information on installment loans, including: Car loans Home equity loans.

Loan To Own 1

Page 2: Loan To Own 1. 2 Purpose Loan to Own provides general information on installment loans, including: Car loans Home equity loans.

Loan To Own 2

Purpose

Loan to Own provides general information on installment loans, including:

• Car loans

• Home equity loans

Page 3: Loan To Own 1. 2 Purpose Loan to Own provides general information on installment loans, including: Car loans Home equity loans.

Loan To Own 3

Objectives

By the end of this course, you will be able to:

• Identify various types of installment loans.

• Explain why installment loans cost less than rent-to-own services.

• Identify the factors lenders use to make loan decisions.

Page 4: Loan To Own 1. 2 Purpose Loan to Own provides general information on installment loans, including: Car loans Home equity loans.

Loan To Own 4

Objectives (Continued)

• Identify the questions to ask when purchasing a car.

• Describe the advantages and disadvantages of borrowing against a home.

Page 5: Loan To Own 1. 2 Purpose Loan to Own provides general information on installment loans, including: Car loans Home equity loans.

Loan To Own 5

Installment Loans

Installment loans are loans that are repaid in equal monthly payments, or installments, for a specific period of time, usually several years.

Page 6: Loan To Own 1. 2 Purpose Loan to Own provides general information on installment loans, including: Car loans Home equity loans.

Loan To Own 6

Types of Installment Loans

• Secured loan

• Unsecured loan

Page 7: Loan To Own 1. 2 Purpose Loan to Own provides general information on installment loans, including: Car loans Home equity loans.

Loan To Own 7

Secured Loan

A secured installment loan is one where the borrower:

• Offers collateral for the loan.

• Gives up his or her right to the collateral if the loan is not paid back as agreed.

Page 8: Loan To Own 1. 2 Purpose Loan to Own provides general information on installment loans, including: Car loans Home equity loans.

Loan To Own 8

Unsecured Loan

An unsecured loan is a loan that does not require collateral.

Page 9: Loan To Own 1. 2 Purpose Loan to Own provides general information on installment loans, including: Car loans Home equity loans.

Loan To Own 9

Cost of Installment Loans

• Annual percentage rate (APR)

• Fixed rate loan

• Variable rate loan

• Finance charge

Page 10: Loan To Own 1. 2 Purpose Loan to Own provides general information on installment loans, including: Car loans Home equity loans.

Loan To Own 10

Car Loans versus Car Leases

• Ownership potential

• Wear and tear

• Monthly payments

• Mileage limitations

• Auto insurance

• Cost

Page 11: Loan To Own 1. 2 Purpose Loan to Own provides general information on installment loans, including: Car loans Home equity loans.

Loan To Own 11

Financing a Car

Getting a car loan = Financing a car

• Use the loan to purchase a new or used car.

• Car becomes collateral for the loan.

• The lender holds the car title.

• New car loans last 3 to 7 years; used car loans last 2 to 5 years.

Page 12: Loan To Own 1. 2 Purpose Loan to Own provides general information on installment loans, including: Car loans Home equity loans.

Loan To Own 12

Where to Obtain a Car Loan

• Banks

• Credit unions

• Thrifts

• Finance companies

• Car dealerships

Page 13: Loan To Own 1. 2 Purpose Loan to Own provides general information on installment loans, including: Car loans Home equity loans.

Loan To Own 13

Loan Pre-approval

The financial institution calculates how much money you can borrow to buy your car.

• It is a free service.

• It does not obligate you to accept a loan offer from the institution.

Page 14: Loan To Own 1. 2 Purpose Loan to Own provides general information on installment loans, including: Car loans Home equity loans.

Loan To Own 14

When Dealers Offer Low Interest Rates

To get the lowest advertised rate, you might have to:

• Make a large down payment.

• Agree to a short loan term, usually 3 years or less.

• Have an excellent credit history.

• Pay a participation fee.

Page 15: Loan To Own 1. 2 Purpose Loan to Own provides general information on installment loans, including: Car loans Home equity loans.

Loan To Own 15

Participation Fees

Money that some dealer finance companies might charge to get a low interest rate.

Example:

To get a 2 percent APR, you pay a participation fee of $200.

Page 16: Loan To Own 1. 2 Purpose Loan to Own provides general information on installment loans, including: Car loans Home equity loans.

Loan To Own 16

Beware of Dealer-Lender Relationships

When you ask for dealer financing, the dealer might call several lenders:

• A dealer might pick the lender that makes the most profit for the dealership.

• For referring you and other customers, the lender might pay money to the dealership.

Page 17: Loan To Own 1. 2 Purpose Loan to Own provides general information on installment loans, including: Car loans Home equity loans.

Loan To Own 17

Car Title Loans

Short-term (usually 1 month) loans that allow you to use your car as collateral to borrow money.

Page 18: Loan To Own 1. 2 Purpose Loan to Own provides general information on installment loans, including: Car loans Home equity loans.

Loan To Own 18

Home Equity Loans

A loan that allows you to borrow against the “equity” in your home.

Equity = The value of the home minus the debt

Page 19: Loan To Own 1. 2 Purpose Loan to Own provides general information on installment loans, including: Car loans Home equity loans.

Loan To Own 19

Unsecured Installment Loans

Sometimes called personal or signature loans, these loans can be used for personal expenses such as:

• Bill consolidation

• Education expenses

• Medical expenses

Page 20: Loan To Own 1. 2 Purpose Loan to Own provides general information on installment loans, including: Car loans Home equity loans.

Loan To Own 20

Benefits of Unsecured Installment Loans

• Fast approval time

• Interest rates lower than credit card rates

Page 21: Loan To Own 1. 2 Purpose Loan to Own provides general information on installment loans, including: Car loans Home equity loans.

Loan To Own 21

The Four Cs of Loan Decision-Making

• Capacity

• Capital

• Character

• Collateral


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