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Paying for college and cars


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Presentation on paying for college and cars.

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Paying for college and cars

  1. 1. Paying for College and Cars FDIC Money Smart for Young Adults Building: Knowledge, Security, Confidence
  2. 2. Pre- Assessment <ul><li>What is a secured loan? </li></ul><ul><li>A loan where the borrower offers collateral for a loan </li></ul><ul><li>A Loan where no collateral is needed </li></ul><ul><li>A low interest-rate loan </li></ul><ul><li>A loan that can be approved quickly </li></ul>
  3. 3. <ul><li>When you finance a car, the car then becomes ___________ for the loan. </li></ul><ul><li>Payment </li></ul><ul><li>Credit </li></ul><ul><li>Collateral </li></ul><ul><li>The title </li></ul>
  4. 4. <ul><li>Why should you want to avoid a rent-to-own situation? </li></ul><ul><li>Because you would pay a large interest rate. </li></ul><ul><li>Because it may cost you more in the end. </li></ul><ul><li>Because you are the legal owner of the property. </li></ul><ul><li>Because you do not have to purchase the item . </li></ul>
  5. 5. <ul><li>Which of the following do you NOT need to consider when deciding on whether to finance or lease a car? </li></ul><ul><li>Wear and tear </li></ul><ul><li>Monthly payments </li></ul><ul><li>Mileage limitations </li></ul><ul><li>Cost of fuel </li></ul>
  6. 6. <ul><li>What is the first step in applying for financial aid? </li></ul><ul><li>Talk to your financial advisor. </li></ul><ul><li>Complete the FASFA. </li></ul><ul><li>Apply for college. </li></ul><ul><li>Calculate the cost of college. </li></ul>
  7. 7. Purpose <ul><li>Car loans </li></ul><ul><li>Student loans </li></ul>The Paying for College and Cars module provides general information on installment loans, including:
  8. 8. Objectives <ul><li>Differentiate between secured and unsecured installment loans </li></ul><ul><li>Explain why installment loans cost less than rent-to-own services </li></ul><ul><li>Identify the factors lenders use to make loan decisions </li></ul><ul><li>Identify questions to ask when buying a car </li></ul><ul><li>Describe college loans and loan programs </li></ul>By the end of this course, you will be able to:
  9. 9. Todd Wonders about Loans for College…
  10. 10. Installment Loans <ul><li>Repaid in equal monthly payments </li></ul><ul><li>Repaid for a specific period of time, usually several years </li></ul>
  11. 11. Types of Installment Loans <ul><li>Secured loan </li></ul><ul><li>Unsecured loan </li></ul>
  12. 12. Secured Loans <ul><li>Offers collateral for the loan </li></ul><ul><li>Gives up his or her right to the collateral if the loan is not paid back as agreed </li></ul>The borrower:
  13. 13. Unsecured Installment Loans <ul><li>Sometimes called personal or signature loans </li></ul><ul><li>Can be used for: </li></ul><ul><ul><li>Education expenses </li></ul></ul><ul><ul><li>Medical expenses </li></ul></ul>
  14. 14. Benefits of Unsecured Installment Loans <ul><li>Fast approval time </li></ul><ul><li>Interest rates lower than credit card rates </li></ul>
  15. 15. Activity 1: Unsecured Installment Loan Tips <ul><li>Complete Activity 1 in your Participant Guide </li></ul><ul><ul><li>Review the loan tips </li></ul></ul>
  16. 16. Cost Terms Related to Installment Loans <ul><li>Annual percentage rate (APR) </li></ul><ul><li>Fixed-rate loan </li></ul><ul><li>Variable-rate loan </li></ul><ul><li>Finance charge </li></ul>
  17. 17. Activity 2: Cost of Installment Loans <ul><li>Complete Activity 2 in your Participant Guide </li></ul><ul><ul><li>Review the terms </li></ul></ul><ul><ul><li>What terms are being described in each scenario? </li></ul></ul>
  18. 18. Activity 3: Consumer Loans vs. Rent-to-Own <ul><li>Complete Activity 3 in your Participant Guide </li></ul><ul><ul><li>Break into 2 groups </li></ul></ul><ul><ul><li>Read through your section of material </li></ul></ul><ul><ul><li>List and describe 5 reasons to choose your payment method </li></ul></ul>
  19. 19. The Four Cs
  20. 20. Activity 4: Loan Approval <ul><li>Complete Activity 4 in your Participant Guide </li></ul><ul><li>Apply for a loan and see if the Loan Officer will approve you: </li></ul><ul><ul><li>What is the loan for? </li></ul></ul><ul><ul><li>How much is the loan? </li></ul></ul><ul><ul><li>How do you qualify? </li></ul></ul>
  21. 21. Car Loans vs. Car Leases <ul><li>Ownership potential </li></ul><ul><li>Wear and tear </li></ul><ul><li>Monthly payments </li></ul><ul><li>Mileage limitations </li></ul><ul><li>Auto insurance </li></ul><ul><li>Cost </li></ul>
  22. 22. Activity 5: Car Loans vs. Car Leases <ul><li>Complete Activity 5 in your Participant Guide </li></ul><ul><li>Role play to prove your case to the other side of the class </li></ul><ul><ul><li>Car Salesman </li></ul></ul><ul><ul><li>Teen who wants to buy a car </li></ul></ul><ul><ul><li>Parent/Guardian </li></ul></ul>
  23. 23. Financing a Car <ul><li>Car is collateral for the loan </li></ul><ul><li>Lender holds the car title </li></ul><ul><li>Amount you pay depends on the price of the car, the APR, and length of loan </li></ul>“ Getting a car loan” = “Financing a car”
  24. 24. Where to Obtain Car Loans <ul><li>Banks </li></ul><ul><li>Credit unions </li></ul><ul><li>Thrifts </li></ul><ul><li>Finance companies </li></ul><ul><li>Car dealerships </li></ul>
  25. 25. Loan Pre-approval <ul><li>Loan pre-approval: </li></ul><ul><li>Is a free service </li></ul><ul><li>Does not obligate you to accept a loan offer from the institution </li></ul>Lender figures out how much they will lend
  26. 26. When Dealers Offer Low Interest Rates <ul><li>Make a large down payment </li></ul><ul><li>Agree to a short loan term, usually 3 years or less </li></ul><ul><li>Have an excellent credit history </li></ul><ul><li>Pay a participation fee </li></ul>
  27. 27. Participation Fees <ul><li>Example: To get a 2 percent APR, you pay a participation fee of $200 </li></ul>A charge to get a lower rate
  28. 28. Beware of Dealer-Lender Relationships <ul><li>Dealer might pick the lender that makes the most profit for the dealership </li></ul><ul><li>Lender might pay money to the dealership for referring you and other customers </li></ul>
  29. 29. Activity 6: Beware of Dealer-Lender Relationships <ul><li>Complete Activity 6 in your Participant Guide </li></ul><ul><ul><ul><li>Review the instructions </li></ul></ul></ul><ul><ul><ul><li>Answer the questions </li></ul></ul></ul>
  30. 30. Activity 7: Auto Financing Tips <ul><li>Complete Activity 7 in your Participant Guide </li></ul><ul><ul><li>Review the tips </li></ul></ul>
  31. 31. Car Title Loans <ul><li>Short-term (usually 1 month) loans </li></ul><ul><li>Use your car as collateral </li></ul><ul><li>Watch out for high interest rates </li></ul>
  32. 32. Activity 8: Beware of Car Title Loans <ul><li>Complete Activity 8 in your Participant Guide </li></ul><ul><ul><li>Review the instructions </li></ul></ul><ul><ul><li>Answer the questions </li></ul></ul>
  33. 33. Cost of College Calculator Income – Expenses = $ __________ (Your Balance) Expenses Income Education $ Family Contribution $ Tuition Parents Books You Fees Friends/Relatives Supplies Transportation $ Financial Assistance $ Bus/Air/Train Summer Job Savings Car Payment Other Savings Car Repair/Insurance Housing $ Financial Aid Grants $ Mortgage Pell Dormitory/Rent FSEOG Utlities ACG/ SMART Telephone Institutional State Food $ Federal Direct Loans $ Room & Board Plan Subsidized Stafford Groceries Unsubsidized Stafford Health $ Loans $ Insurance Federal Perkins Doctor/Prescriptions FFEL State Personal/Miscellaneous $ Employment $ Laundry/Cleaning Federal Work-Study Drug Store Items Institutional Clothing Off-Campus Entertainment $ Scholarships $ In-School Interest $ Other Income/Resources $ Direct Unsubsidized Loan Emergencies $ Other Expenses $ Credit Card Payment Total Expenses $ Total Income $
  34. 34. Activity 9: Cost of College Calculator <ul><li>Complete Activity 9 in your Participant Guide </li></ul><ul><ul><ul><li>Review the items in the Cost of College Calculator </li></ul></ul></ul><ul><ul><ul><li>Is there anything in the Expense column that you do not understand? </li></ul></ul></ul>
  35. 35. Tips to Getting Aid <ul><li>Read all instructions </li></ul><ul><li>Apply early </li></ul><ul><li>Complete tax returns </li></ul><ul><li>File FAFSA electronically </li></ul><ul><li>Locate any additional forms </li></ul>
  36. 36. Scholarships <ul><li>Designated for students who fit a particular profile </li></ul><ul><ul><li>Music </li></ul></ul><ul><ul><li>Arts </li></ul></ul><ul><ul><li>Athletics </li></ul></ul><ul><ul><li>Academics </li></ul></ul>
  37. 37. Activity 10: Grant Programs <ul><li>Complete Activity 10 in your Participant Guide </li></ul><ul><li>Review the information about: </li></ul><ul><ul><li>Federal Pell Grant </li></ul></ul><ul><ul><li>FSEOG </li></ul></ul><ul><ul><li>Academic Competitiveness Grant </li></ul></ul><ul><ul><li>National SMART Grant </li></ul></ul>
  38. 38. Federal Loan Programs <ul><li>Complete the FAFSA to see if you qualify for federal programs </li></ul><ul><li>Private Loans also available </li></ul>
  39. 39. Activity 11: Loan Programs <ul><li>Complete Activity 11 in your Participant Guide </li></ul><ul><li>Review the information about various loan programs: </li></ul><ul><ul><li>Federal Work-Study </li></ul></ul><ul><ul><li>Federal Perkins Loans </li></ul></ul><ul><ul><li>Stafford Loans (FFELs and Direct Loans) </li></ul></ul><ul><ul><li>PLUS Loans </li></ul></ul>
  40. 40. Repay Your Loan <ul><li>Begin repayment after: </li></ul><ul><ul><li>Graduation </li></ul></ul><ul><ul><li>Leaving school </li></ul></ul><ul><ul><li>Below half-time enrollment </li></ul></ul><ul><li>Exit counseling </li></ul><ul><li>Consolidating student loans </li></ul>
  41. 41. Activity 12: Alternative Ways to Pay for College <ul><li>Complete Activity 12 in your Participant Guide </li></ul><ul><li>What are some other ways to pay for college? </li></ul><ul><li>Record your responses </li></ul>
  42. 42. CONCLUSION: Even Ramón may need a Loan!
  43. 43. Paying for College and Cars <ul><li>Secured and unsecured loans </li></ul><ul><li>The cost of loans </li></ul><ul><li>The Four Cs of loan decisions </li></ul><ul><li>Car loans and auto financing </li></ul><ul><li>Scholarships and grants </li></ul><ul><li>Student loans </li></ul>Congratulations! You have completed the Paying for College and Cars module. You have learned about:
  44. 44. Assess Your Knowledge Don’t forget to complete the Knowledge Check in your Participant Guide!
  45. 45. Thank you! <ul><li>American Debt Counseling, Inc. </li></ul><ul><li>1 888 DEBT USA </li></ul><ul><li> </li></ul>