Loans Flashcards
What is APR?
Annual percentage rate
Nathan buys a car for $12k. His monthly payment with interest is $266 on a 48 month loan. How much does he pay for the car in total?
Answer: $12,768
Equation: $266 x 48 = $12,768
Nathan buys a car for $12k. His monthly payment with interest is $266 on a 48 month loan. How much does he pay in interest?
Answer: $768
$12,768 - $12,000 = $768
Why are most people attracted to longer auto loans such as 72 months as opposed to a 36 month loan?
Because of lower payments
What is the disadvantage of a longer 60 or 72 month auto loan?
Paying more in interest
What are the advantages of a 15 year home loan over a 30 year home loan?
less total interest
what are the advantages of a 30 year home loan over a 15 year home loan?
lower monthly payment
what are the disadvantages of a 30 year loan?
pay more in interest
what are the disadvantages of a 5/1 arm loan?
Years 6-30, you pay much more interest
what is the typical down payment for a first time home buyer?
0% - 3.5%
Maxwell can’t afford the monthly payment of a 15 year loan for his $3.9 million dollar dream home an is forced to go with a 30 year loan. His monthly income fluctuates from month to month because he is paid on commission. What could he do to reduce the months/years he has to pay on the loan as well as the amount of interest he as to pay?
Make extra payments
What is PMI?
Private mortgage insurance
At what percentage of a down payment on a home does PMI go away?
20%
Landon buys a house that costs $250,000 on a 30 year fixed loan. His monthly payment is $1,422. How much does he pay for the house in total?
Answer: $511,920
Equation: $1,422 x 12 x 30 = $511,920
Landon buys a house that costs $250,000 on a 30 year fixed loan. His monthly payment is $1,422. How much does he pay in interest?
Answer: $261,920
Equation: $511,920 - $250,000 = $261,920
