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  • 1. LOANS Sources of Credit
  • 2. Why do we need loans?
    • We may need something that we do not have the money for currently
    • Cover the purchase of a big ticket item
      • Home
      • Car
      • Education Loans
  • 3. Secured Loan
    • Loans that are protected by an asset or COLLATERAL.
      • A home can secure a loan (Home Equity)
      • A car can secure a loan (Auto Loan)
      • Personal property can secure a loan
        • Stocks, bonds, CDs
    • Best way to get a loan quickly
    • Secured Loans offer lower interest and monthly payments
  • 4. Unsecured Loan
    • Opposite of secured loans because they are not backed by any collateral
    • Therefore, lenders take on MORE risk and charge MORE interest
    • Examples include:
      • Credit Cards
      • Student Loans
    Lenders take a GAMBLE on you!
  • 5. Education Loans
    • Form of financial aid that must be repaid with interest (4 types)
      • Student Loans
      • Parent Loans (PLUS Loans)
      • Private Student Loans
      • Consolidation Loans
  • 6. Education Loans
    • Student Loans
      • Federal loans to finance education.
      • Have low interest rates w/o credit check
      • Deferment options
    • Parent Loans (PLUS Loans)
      • Enable parents with good credit to borrow money to pay for their child’s undergraduate education expenses
      • Require no collateral
      • Interest is tax deductible
      • Interest rate is fixed at 8.5% as of July 1 2006
  • 7. Education Loans
    • Private Student Loan
      • Unsecured and credit-based loans
      • Available for education-related expenses
      • From private institutions (not Gov’t)
    • Consolidated Loan
      • Combine several student or parent loans into one bigger loan from a single lender
      • Interest rate is the weighted average of loans being consolidated. Capped at 8.25%
  • 8. Auto Loan
    • Secured loan to finance the purchase of a vehicle
      • The automobile acts as collateral
      • Term and interest can vary
        • Lower interest rates available on new cars versus used cars
  • 9. Mortgage
    • Secured loan to finance the purchase of a home
      • Home is used as collateral
      • Rates and term may vary