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Workforce Solutions for the Heart of Texas

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					Loan To Own   1
              Introduction
• Instructor and student introductions

• Module overview




                    Loan To Own          2
       Student Introductions
• Your name

• Your expectations, questions, and
  concerns about loans




                   Loan To Own        3
               Purpose
Loan to Own provides general information
on installment loans, including:
• Car loans
• Home equity loans




                  Loan To Own              4
               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               5
      Objectives (Continued)
• Identify the questions to ask when
  purchasing a car.
• Describe the advantages and
  disadvantages of borrowing against a
  home.




                  Loan To Own            6
     Agenda and Ground Rules
•   90 minutes long
•   One 10-minute break
•   Training methods
•   Class participation




                   Loan To Own   7
          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              8
   Types of Installment Loans
• Secured loan

• Unsecured loan




                   Loan To Own   9
             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               10
          Unsecured Loan
An unsecured loan is a loan that does not
require collateral.




                   Loan To Own              11
      Cost of Installment Loans
•   Annual percentage rate (APR)
•   Fixed rate loan
•   Variable rate loan
•   Finance charge




                    Loan To Own    12
    Car Loans versus Car Leases
•   Ownership potential
•   Wear and tear
•   Monthly payments
•   Mileage limitations
•   Auto insurance
•   Cost


                    Loan To Own   13
             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                14
    Where to Obtain a Car Loan
•   Banks
•   Credit unions
•   Thrifts
•   Finance companies
•   Car dealerships




                   Loan To Own   15
         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             16
 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             17
         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          18
      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             19
            Car Title Loans
Short-term (usually 1 month) loans that
allow you to use your car as collateral to
borrow money.




                    Loan To Own              20
        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             21
  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            22
 Benefits of Unsecured Installment
               Loans
• Fast approval time

• Interest rates lower than credit card rates




                    Loan To Own                 23
     The Four Cs of Loan Decision-
               Making
•   Capacity
•   Capital
•   Character
•   Collateral




                 Loan To Own         24

				
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