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

Today,about 75 percent of high school graduates choose to attend four-year colleges,community colleges,technical schools,or the workforce.

Many lenders will hold Dave to the 28/36 rule in evaluating his application for a mortgage.What does the 36 mean?

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

You are considering building a new deck on your home,what factors should you consider when deciding whether to borrow the money or take the money out of your savings account?

Samuel is having financial troubles.He owes a significant amount of money to his ex-wife for child support payments,he is also behind on his student loans and has not paid his taxes for the last five years.Sam is considering filing for personal bankruptcy.Why might this not be a wise financial decision for him?

What will the courts do if you file Chapter 7 personal bankruptcy?

Name the four common loans available for college students.

Bridge loans provide short-term funding until longer-term or additional financing is found.

What are some of the leading causes of bankruptcy?

When borrowing for college,one thing to keep in mind is that you're not just paying for one year of school.About half of all colleges practice what is called "front loading of grants," which means that

Amortization refers to the process in which a large proportion of the early payments of an installment loan goes to cover interest,and the later payments have a larger proportion going towards the payment of principal.

With a(n)________ installment loan,interest charges are calculated using the original balance,and these charges are then added to the loan.

You are considering a home equity loan.Your marginal tax bracket is 25%.You want to borrow $30,000 and are quoted an APR of 10%.How much money would you save in taxes in the first year if you use the tax-deductible home equity loan?

Describe the four major parts of a typical loan contract.

The annual percentage rate is the simple percentage cost of all finance charges over the life of the loan on an annual basis.

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.

You have just obtained a personal loan for a new home movie system under the simple interest method.You have borrowed $12,000 for 9 months at an annual rate of 10%.Your marginal tax rate is 28%.What are the total interest charges you would pay if the loan is paid off in one payment at the end of the nine month period?

Why is the discount method more costly than the simple interest method on a single-payment loan?

Sharry is interested in buying her first home.Currently her monthly gross income is $3,000.From this she makes a car payment of $240,a personal loan payment of $300 and a student loan payment of $85.Based on this information would a bank approve Sharry for a mortgage?

With a discount method single-payment loan,the entire interest charge is subtracted from the principal before you receive the money,and at maturity you repay the principal.