13 C Presentation StMarys · 13_C_Presentation_StMarys.pdf Created Date: 12/27/2016 10:00:56 PM ...
Transcript of 13 C Presentation StMarys · 13_C_Presentation_StMarys.pdf Created Date: 12/27/2016 10:00:56 PM ...
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LoanBASICS
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Loans are the gatekeepers to some of our biggest goals.
They help cover large purchases that people generally can’t afford upfront.
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MORTGAGES
LOANS
STUDENT LOANS
PERSONAL LOANS
SMALL BUSINESS LOANS
AUTO LOANS
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LoanTERMINOLOGY
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The amount of money borrowed on a loan.
(It can sometimes refer to the amount of debt, exclusive of interest, remaining on a loan.)
Principal Interest Term
$5,000 4.99% APR 48 months
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The amount of money borrowed on a loan.
(It can sometimes refer to the amount of debt, exclusive of interest, remaining on a loan.)
The amount charged by a lender to a borrower for the
use of the money.
(Often shown as an Annual Percentage Rate (APR). The
APR represents the yearly cost of the loan, including fees.)
Principal Term
$5,000 48 monthsInterest
4.99% APR
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The amount of money borrowed on a loan.
(It can sometimes refer to the amount of debt, exclusive of interest, remaining on a loan.)
The time period in which you agree to pay back
your loan.
The amount charged by a lender to a borrower for the
use of the money.
(Often shown as an Annual Percentage Rate (APR). The
APR represents the yearly cost of the loan, including fees.)
Principal
$5,000Term
48 monthsInterest
4.99% APR
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Secured vs. UnsecuredLOANS
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Loans can either be secured or unsecured, depending on whether or not they’re
protected by collateral.
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Property, vehicles and investments are all common
forms of collateral.
Collateral is something valuable that the lender can seize as a form of repayment if the borrower defaults on his or her loan.
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• Requires collateral• Tends to have lower interest• Usually longer term
• No collateral required
• Tends to have higher interest• Usually shorter term
SECURED LOAN UNSECURED LOAN
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Ways to lower your INTEREST RATE
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SECURE YOUR LOAN
Secured loans tend to have lower interest because they’re less risky to the lender.
CAR LOAN
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ONLY BORROW WHAT YOU NEED
The more you borrow and the longer the term, the higher the interest rate will be.
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BOOST YOUR CREDIT SCORE
Higher credit scores qualify you for lower rates on your loan.
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KNOW WHAT LENDERS LOOK FOR
Things like a solid employment history, no outstanding debt and a good relationship with your financial institution can all help.
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GET A CO-SIGNER
If you default on your loan, your co-signer takes on the debt as if it were their own.
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Fixed vs. VariableINTEREST RATES
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In a fixed-rate loan, the interest rate stays the same throughout the entire term of the loan.
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A variable-rate loan is based on a chosen index, so it changes throughout the term of your loan.
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The index is a benchmark that reflects changes in the national economy.
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If the index goes up, so does your rate.
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If the index goes down, so does your rate.
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Meanwhile, the fixed rate stays the same.
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• Stays the same throughout the entire term of the loan
• Tends to have higher interest to counter the effect of rates rising in the future
• Consistent and easier to budget for
FIXED RATE
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• Changes over time and is based on a chosen index
• Tends to have lower interest since the index is likely to go up over time
• Unpredictable and harder to budget for
VARIABLE RATE
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Sources: Investopedia, Wise Bread
It’s a Money Thing is a registered trademark of Currency Marketing
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