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Learning Objectives
1. Understand the various consumer loans. 2. Calculate the cost of a consumer loan. 3. Pick an appropriate source for your loan. 4. Control your debt.
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Introduction
Consumer loansformal contracts detailing how much youre borrowing and when and how youre going to pay it back. Used for bigger purchases. Debt and borrowing can get out of control.
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Fourth Decision: The Loans MaturityShorter versus Longer Term Loans Shorter term loan means lower interest rate and larger monthly payments Longer term loan means smaller monthly payments and higher interest rate
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Acceleration clause
Deficiency payments clause
Recourse clause
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Discount method
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Post-dated check with fee and principal left with payday lender.
Due in 1 or 2 weeks. Annualized interest rates up to 400%
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Table 7.3 Monthly Installment Loan Tables ($1,000 loan with interest payments compounded monthly)
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Go to a credit counselor.
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Chapter 13
Chapter 7
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Summary
Consumer loans can be single-payment loans, installment loans, secured loans, or unsecured loans. Loan costs are finance charges which include interest payments, processing fees,
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Summary
Numerous sources of loans but key to getting favorable rate is a strong credit rating and reducing lenders risk. Control debt by borrowing when debt fits within your financial plan and budget, and know your debt limits using the debt limit ratio and debt resolution rule.
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