Exam 7: Student and Consumer Loans: The Role of Planned Borrowing

If your before-tax cost of a home equity loan is 12 percent and you are in the 30 percent marginal tax bracket,your after-tax cost of the home equity loan is 9 percent.

Unsecured loans are generally less risky to lenders than secured loans.Therefore secured loans typically charge a higher APR than unsecured loans.

Name the advantages and disadvantages of an unsecured loan.

What are the advantages of a home equity loan,and what,if any,are the disadvantages?

What strategy should you use to obtain the lowest possible APR on a loan?

Veronica was offered a loan using the discount method of calculation by her bank.She will borrow $10,000 for one year at an APR of 11%.How large will the check be that Veronica receives? How much must she repay?

Frank ran up a large credit card bill as an undergraduate student,he also took out as much in student loans as possible.He is now unable to pay his credit card debt and his student loan debt.However,he has decided to declare bankruptcy to eliminate his debt.Frank will be able to eliminate his federally subsidized student loan debt by declaring bankruptcy.

Steven is beginning a new job but has not yet been paid.He needs $400 to pay his rent this month.Steven is going to borrow the money through a Payday Loan establishment.They are charging him an $80 fee to borrow the money for 10 days until he receives his first paycheck.What is the actual interest rate that Steven is being charged?

Name the four common loans available for college students.

Brenda found out that reputable lenders use the 28/36 rule when determining mortgage qualification.Brenda currently grosses $6,000 per month.From this she pays a $200 car payment;a personal loan of $100 and a student loan payment of $90.Based on this information,would Brenda qualify for a mortgage?

What are some of the leading causes of bankruptcy?

Neal's life insurance policy has a cash value of $100,000.He wants to purchase a second home to rent out.How much can Neal borrow against the surrender value of his life insurance policy?

A simple interest installment loan calculates interest on the unpaid balance.An add-on

What is the name of the formal document that outlines the legal obligations of both the lender and the borrower?

The "Repo Man" recently repossessed your car for failure to make payments.You still owed $5,000 on the loan,but since it was always broken,you were glad to get rid of it anyway.The bank sold the car at a wholesale auction for $3,000.The bank also paid the "Repo Man" $200 and paid attorney fees of $300.Based on the deficiency payments clause in your loan,what are you liable for?

An acceleration clause states that if you default on a secured loan,not only can the lender repossess whatever is secured,but if the sale of the asset does not cover what you owe,you can also be billed for the difference.

An advantage that direct or subsidized student loans have over other types of loans is

A ________ is tied to a market interest rate,such as the prime rate or the six-month Treasury bill rate.

A short-term loan that provides funding until a longer-term loan can be secured is called a(n)

Under a Stafford Loan,parents borrow money for their child's education.