Lending Presented by Victoria King

Objectives By the end of this class, you will know: What to expect when applying for a loan How to prepare yourself to qualify for the loan you want Types of loans available Why not all loans come at the same price Insurance options, more than just insuring you have a car What happens when you don’t pay

What to Expect Questions – will revolve around the 5 C’s of Credit Character – who are you, what’s your reputation Capacity – can you repay this debt, what’s your income Capital – what’s your investment in this venture (down payment) Collateral – is there any security for the loan Conditions – terms under which lender will lend (interest rate, maturity, principal amount)

What to Expect Documentation – What documentation a lender requests of you depends on the type of loan and purpose for your request Income – paystubs, W2 – make sure they’re current Purchase order – what are you buying and how much is it costing you Title – proof of ownership and identifies the collateral Insurance – you need to maintain insurance on the collateral Loan Application – lender form

Avoid Surprises… Pre-qualify for your loan! Visit your lender and request a pre- qualification. No charge for most loans You’ll know your credit is ok, what your interest rate should be, how much money they will loan you and what your expected payment will be

Samples Loan Application Interest Rates TODAY’S RATES Credit ScoreNew RateUsed Rate %3.49% %4.49% %5.49% %6.49% New = 2009 and newer models Used = models

Part I: Go Shopping Pick your vehicle & loan amount You do not currently have a vehicle and you have $500 for a down payment Payment Calculator

Part II: Loan Interview Interview your partner, making sure to get enough info to fill out your Loan Review Worksheet!

Step III: Credit Decision Review the application you took Calculate Loan to Value: Vehicle Value loan amount/vehicle retail valueVehicle Value Calculate Debt Ratio Debt & Rent Payments + new loan payment / gross monthly income

Types of Loans Available Auto Loan Boat/RV Loan Credit Card Personal Loan Pay-Day Loan Overdraft Protection Line of Credit Student Loan Home Loan (Mortgage)

Term Loans Auto/Personal/Home Set payment amount that covers interest & principal Set maturity date, by which you’ll pay the balance in full All loan funds are disbursed on the date the loan is made

Lines of Credit Credit Card/Overdraft Protection Payments can be interest only or a % of balance (for example 5%) Interest is paid on the balance owing, not the credit limit Set term during which you can borrow, pay back and borrow again (also called revolving credit) Loan funds are not necessarily all paid out on the date you secure the loan

Sample Credit Card Offers All unsolicited offers All different terms, different benefits Rates can jump and stay high with just one late payment

NOT ALL LOANS COME AT THE SAME PRICE It PAYS to have a good credit score A HIGH score entitles you to better interest loan rates, which means a LOWER payment.

Insurance Options GAP – Guaranteed Asset Protection Pays the difference between your insurance co. settlement and the remaining loan amount Disability & Term Life Loan payments will be made, up to established limits, in the event of a covered disability or death Mechanical Breakdown Protection (extended warranty) Automobile protection that extends beyond the manufacturers factory warranty and covers repairs of unexpected mechanical breakdowns ASK YOUR LENDER ABOUT THESE OPTIONS

Making Loan Payments Monthly payments are required! Grace period – time beyond due date to pay your loan payment before a late fee applies Collection Calls Collections Notices Delinquency may be reported to credit bureau Repossession

Any questions?