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Workforce Solutions for the Heart of Texas


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• Instructor and student introductions

• Module overview

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       Student Introductions
• Your name

• Your expectations, questions, and
  concerns about loans

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

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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.

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

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     Agenda and Ground Rules
•   90 minutes long
•   One 10-minute break
•   Training methods
•   Class participation

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          Installment Loans
Installment loans are loans that are repaid in
equal monthly payments, or installments, for
a specific period of time, usually several

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   Types of Installment Loans
• Secured loan

• Unsecured loan

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

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

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      Cost of Installment Loans
•   Annual percentage rate (APR)
•   Fixed rate loan
•   Variable rate loan
•   Finance charge

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    Car Loans versus Car Leases
•   Ownership potential
•   Wear and tear
•   Monthly payments
•   Mileage limitations
•   Auto insurance
•   Cost

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             Financing a Car
       Getting a car loan = Financing a car
•   Use the loan to purchase a new or used
•   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.

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    Where to Obtain a Car Loan
•   Banks
•   Credit unions
•   Thrifts
•   Finance companies
•   Car dealerships

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         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.

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 When Dealers Offer Low Interest
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.

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         Participation Fees
Money that some dealer finance companies
might charge to get a low interest rate.

To get a 2 percent APR, you pay a
participation fee of $200.

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      Beware of Dealer-Lender
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.

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

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        Home Equity Loans
A loan that allows you to borrow against the
“equity” in your home.

Equity = The value of the home minus the

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  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

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 Benefits of Unsecured Installment
• Fast approval time

• Interest rates lower than credit card rates

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     The Four Cs of Loan Decision-
•   Capacity
•   Capital
•   Character
•   Collateral

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