1. 4.2A Loans

2. vocabulary
PROMISSORY Note- an agreement you sign whenever you borrow money which states the conditions of the loan.
Principal- the AMOUNT of money you borrow. 
Annual PERCENTAGE Rate (APR)- the interest rate given per year.
COSIGNER- the person agrees to pay back the loan if the borrower is UNABLE to do so.

3. VOCABULARY
Life INSURANCE - a type of insurance that pays a specified amount upon the policy holder’s death. A creditor often requires a borrower to have this to cover the loan in the event the borrower DIES before the loan is paid.
Prepayment Privilege- allows the borrower to make PAYMENTS before the due date to REDUCE the amount of interest.
Prepayment PENALTY- requires borrowers to pay a fee if they wish to pay back an entire loan BEFORE the due date. 
WAGE Assignment- voluntary DEDUCTION from an employee’s paycheck, used to pay off debts.

4. VOCABULARY
Wage Garnishment- involuntary form of wage assignment, often enforced by COURT order.
BALLOON Payment- the last monthly payment on some loans that are much HIGHER than the previous payments.
Lending INSTITUTIONS- organizations that EXTEND loans.
Collateral- security, such as a PERSONAL belonging, car or boat title, CD, or stock certificates, that insures a loan will be repaid.

5. FORMULAS TO KNOW

6. EXAMPLE ONE
What is the monthly payment for a $4,000 two-year loan with an APR of 8.50%?

7. EXAMPLE TWO
Juan is borrowing $41,000 for 5 years at an APR of 6.5%. What is the monthly payment?

8. EXAMPLE THREE
What is the total amount of the monthly payments for a $4,000, two-year loan with an APR of 8.50%?

9. EXAMPLE FOUR
The total of monthly payments for a 5-year loan is $7, The APR is 7.25%. How much money was originally borrowed?

10. EXAMPLE FIVE
Find the finance charge for a $4,000, two-year loan with an 8.5% APR?