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Introduction

Introduction. Instructor and student introductions Module overview. Student Introductions. Your name Your expectations, questions, and concerns about loans. Purpose. Loan to Own provides general information on installment loans, including: Car loans Home equity loans. Objectives.

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Introduction

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  1. Loan To Own

  2. Introduction • Instructor and student introductions • Module overview Loan To Own

  3. Student Introductions • Your name • Your expectations, questions, and concerns about loans Loan To Own

  4. Purpose Loan to Own provides general information on installment loans, including: • Car loans • Home equity loans Loan To Own

  5. Objectives By the end of this course, you will be able to: • Identify various types of installment loans. • Explain why installment loans cost less than rent-to-own services. • Identify the factors lenders use to make loan decisions. Loan To Own

  6. Objectives (Continued) • Identify the questions to ask when purchasing a car. • Describe the advantages and disadvantages of borrowing against a home. Loan To Own

  7. Agenda and Ground Rules • 90 minutes long • One 10-minute break • Training methods • Class participation Loan To Own

  8. Installment Loans Installment loans are loans that are repaid in equal monthly payments, or installments, for a specific period of time, usually several years. Loan To Own

  9. Types of Installment Loans • Secured loan • Unsecured loan Loan To Own

  10. Secured Loan A secured installment loan is one where the borrower: • Offers collateral for the loan. • Gives up his or her right to the collateral if the loan is not paid back as agreed. Loan To Own

  11. Unsecured Loan An unsecured loan is a loan that does not require collateral. Loan To Own

  12. Cost of Installment Loans • Annual percentage rate (APR) • Fixed rate loan • Variable rate loan • Finance charge Loan To Own

  13. Car Loans versus Car Leases • Ownership potential • Wear and tear • Monthly payments • Mileage limitations • Auto insurance • Cost Loan To Own

  14. Financing a Car Getting a car loan = Financing a car • Use the loan to purchase a new or used car. • Car becomes collateral for the loan. • The lender holds the car title. • New car loans last 3 to 7 years; used car loans last 2 to 5 years. Loan To Own

  15. Where to Obtain a Car Loan • Banks • Credit unions • Thrifts • Finance companies • Car dealerships Loan To Own

  16. Loan Pre-approval The financial institution calculates how much money you can borrow to buy your car. • It is a free service. • It does not obligate you to accept a loan offer from the institution. Loan To Own

  17. When Dealers Offer Low Interest Rates To get the lowest advertised rate, you might have to: • Make a large down payment. • Agree to a short loan term, usually 3 years or less. • Have an excellent credit history. • Pay a participation fee. Loan To Own

  18. Participation Fees Money that some dealer finance companies might charge to get a low interest rate. Example: To get a 2 percent APR, you pay a participation fee of $200. Loan To Own

  19. Beware of Dealer-Lender Relationships When you ask for dealer financing, the dealer might call several lenders: • A dealer might pick the lender that makes the most profit for the dealership. • For referring you and other customers, the lender might pay money to the dealership. Loan To Own

  20. Car Title Loans Short-term (usually 1 month) loans that allow you to use your car as collateral to borrow money. Loan To Own

  21. Home Equity Loans A loan that allows you to borrow against the “equity” in your home. Equity = The value of the home minus the debt Loan To Own

  22. Unsecured Installment Loans Sometimes called personal or signature loans, these loans can be used for personal expenses such as: • Bill consolidation • Education expenses • Medical expenses Loan To Own

  23. Benefits of Unsecured Installment Loans • Fast approval time • Interest rates lower than credit card rates Loan To Own

  24. The Four Cs of Loan Decision-Making • Capacity • Capital • Character • Collateral Loan To Own

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