Types of Consumer Loans: Home Equity, Student, Auto, and Installment Loans, Slides of Fundamentals of E-Commerce

Download Types of Consumer Loans: Home Equity, Student, Auto, and Installment Loans and more Slides Fundamentals of E-Commerce in PDF only on Docsity! Special Types of Consumer Loans • Home equity loans • Student loans • Automobile loans Docsity.com Home Equity Loans • Are basically second mortgages • Use the equity in your home to secure your loan • Normally allow you to borrow up to 80% of your equity Docsity.com Student Loans (cont’d) • Federal Direct and PLUS Direct available through the school; Stafford and PLUS loans available through lenders. • Payment on Federal Direct and Stafford loans deferred for 6 months after graduation. • Borrowing limits apply. Docsity.com Automobile Loans • A consumer loan that is secured with an automobile. • Has a lower interest rate than an unsecured loan. • Normally has a maturity length of 2 to 6 years. Docsity.com Cost and Early Payment of Consumer Loans • Cost of single-payment loans. • Cost of installment loans. • Early repayment of installment loans. • Understanding the relationship between your payments, interest rates, and the term of the loan. Docsity.com Cost of Installment Loans • Repayment of both principal and interest occur at regular intervals • The simple interest method – this is the most common calculation method – remember, with each month the interest portion of the payment decreases and the principal portion increases – you pay interest only on the outstanding balance Docsity.com Cost of Installment Loans (cont’d) • The add-on method – adds the total interest payment to the principal of the loan – much more costly than the simple-interest method – can double the stated rate Docsity.com Early Repayment of Installment Loans • With the simple interest method, it is simply the outstanding balance. • With the add-on method, use the rule of 78s or sum of the year’s digits methods. Docsity.com