Loans Flashcards
(10 cards)
What is a personal loan ?
Most common financing from a financial institution. A personal loan differs from access to credit in that it is normally used for one large purchase and has a specific repayment schedule.
What are a loan contract and terms ?
A contract that specifies the term of a loan as agreed by the borrower and the lender.
What does a loan contract comprises ?
- Amount of the loan ( principal amount)
- interest rate (nominal)
- loan repayment schedule
( Amortization: to repay the principal of the loan through a series of equal payment each including part of the principal and part of interest)
Maturity or Term: the life or duration of the loan
What is the security term of a loan contract ?
Security = A promise to repay or collateral
What is collateral ?
Assets of a borrower that back a loan in the event that the borrower defaults
Explain the difference between a secured loan and an unsecured loan . Which is more favorable ?
Unsecured: not backed by collateral
Secured: backed by collateral
A secured loan is more favorable as one will receive more favorable terms on it
What may be required for a loan if the credit history of an applicant is low ?
That the contract is co-signed
What is a payday loan ?
A short term loan provided to you if you need funds in avance of receiving your pay-check.
What are some indicators of predatory lending (illegal predatory practices ) ?
- Abnormally high loan fees
- tying other product to loan approval
- Including balloon payment at end of the loan
- loan agreement includes confusion information
