1. DO NOW 12/5/16 Use Google to define these terms IN YOUR NOTES Credit
Installment loan
Collateral
Lien

2. GOALS Lesson 1 CONSUMER LOANS
Banking
5/23/2018
Lesson 1 CONSUMER LOANS
GOALS
Define major terms associated with consumer lending
Explain the difference between installment loans and open-end loans
Explain the difference between a secured loan and an unsecured loan
Chapter 6

3. What is Credit anyway? Credit is a promise to pay back money borrowed.
Credit allows a person to make a purchase and delay payment until a future date. This type of transaction is a privilege and is bound by specific laws.
Debtor is the person borrowing the money.
Creditor is the person/company loaning the money or selling on credit.

4. INSTALLMENT LOANS
An installment loan is a loan that is repaid over time with a set number of scheduled payments
The term of loan may be as little as a few months and as long as 30 years
Personal loans
Automobile loans
Home equity loans
Education loans
If I go to Bobs Auto Sales and I take a loan to buy a brand new Jeep Cherokee. Who is the debtor? Who is the creditor?

5. SECURED AND UNSECURED LOANS
A secured loan is one in which some item of value backs the loan in case the borrower defaults on the loan.
The item that secures the loan is called collateral.
A lien is a legal claim to property to secure a debt.
An unsecured loan is a loan backed only by the reputation and creditworthiness of the borrower.
Unsecured loans are sometimes called signature loans.

6. LENDING TERMINOLOGY Principal is the amount borrowed.
Interest is the amount you pay to use the principal.
Fees are other charges for the loan.
The finance charge is the total dollar amount to be paid for the loan.
Total payments is the total amount a consumer must repay.
Payment is the amount the borrower repays each specified period.

7. OPEN-END LOANS Credit cards Lines of credit
Grace period - The amount of time you have to pay the bill in full and avoid any finance charges.
Lines of credit
Open-end credit agreements are advantageous to borrowers, as they exert more control over how much they borrow and when. In addition, interest is not usually charged on the part of the line of credit that is not used, which can lead to interest savings for the borrower

8. Would you lend your money to just anyone?
3 C’s of Credit
Collateral
An item of value that backs the loan in case the borrower defaults on the loan. The bank uses the collateral to recover the financial loss of an uncollected loan. If car is worth $10k, why would I loan you $15k?
Capacity
The debtor’s ability to pay back a loan. Does the debtor have a job? How long have you been working there?
Character
Refers to the debtor’s honesty and willingness to pay back a loan. Creditor’s take into account the reputation of paying back loans on time - i.e. Credit Score.

9. Exit Slip
Explain the difference between an installment loan and an open-end loan.
Explain the difference between a secured loan and an unsecured loan.