Chapter 7: Planned Borrowing. Discuss the elements of the planned use of credit. Establish your own debt limit. Understand the language of consumer loans. Describe the sources of consumer loans. Objectives. Calculate the APR and finance charges on both single-payment and installment loans.
Establish your own debt limit.
Understand the language of consumer loans.
Describe the sources of consumer loans.Objectives
Yet, only 1:3 shop for credit terms!Planned Borrowing
DID YOU KNOW!
Debt To Equity Ratio
Should be < 1
*Excluding home value
* Excluding home mortgage loans and convenience credit to be repaid in full when the bill arrives.
Monthly Installment Payment (Principal and Interest) Required to Repay $1,000*
*To illustrate, assume you want to know how much the monthly payment would be to finance a $9,000 loan at 10% for 3 years. To repay $1,000, the figure is $32.27, multiply by 9 (for $9,000) to determine that $290.43 is required for 36 months of payments. When using amounts greater or less than $1,000, convert using decimals. For example, a loan of $950 at 10 percent for 3 years would be calculated as follows: $32.27 x 0.95 = $30.66.
The Truth In Lending Act requires creditors to provide you with accurate and complete credit costs and terms. APR
Calculating Finance Charges and APR
APR CALCULATIONS FOR INSTALLMENT LOANS:
TEN SIGNS OF OVER-INDEBTNESS:
1. Determine what is owed.
2. Focus budget on debt reduction.
3. Contact creditors.
4. Take on no new credit.
6. Find good help.
7. Avoid bad help.
1. Choose most advantageous repayment pattern allowed.
2. Consolidate student loans.
3. Pay electronically.
4. Be punctual with repayments.
5. Refinance with second mortgage loan.