Interest Rates & Loans Borrowing money intelligently

Lessons of Subprime Mortgages Know the details of each loan! Subprime borrowers did not…. No down payment , Borrowers had poor credit history initial low interest rates (teaser rates) Interest rates were “adjustable” Interest Rates increased rapidly in 2005-06 led to rapidly rising monthly payments in the future

$1.50 Trillion (2019) Debt Slave

Key Details of Loan Bank Interest rates are the cost of borrowing money (or benefit of saving it!) Terms of a Loan: Fixed or Floating interest rates Repayment periods (1-30 years) Accrued Interest period $5,000 Principle Payment You borrow $5,000 Bank + Interest Payments $5,000 Total Loan Payment = Principal Payment + Interest Payments

Amortization Schedule: how the principle of a loan is “paid down” over time Monthly payment = principal payment + interest payment $506.69

Interest Rate Worksheet