2. Automobile Loans 9 th Grade Business

3. Automobile Automobiles are typically purchased with cash or loan/ credit Auto loan-borrowed money to purchase an automobile Lender- financial institution who offers loans to consumers Credit rating- evaluation of one’s credit history

4. Cosigner Cosigner- person that is equally responsible for the auto loan o It the borrower defaults on the auto loan, the co-signer will be required to pay o Parents usually co-sign for their children

5. Secured Loan Secured loan- requires a cosigner or collateral o If a loan has collateral, the lender has security interest in the property pledged as collateral o Automobile loans are secured because the automobile is the collateral o If the auto loan is not paid, the lender has the right to seize the collateral by repossession or retrieving the property

6. Lenders Credit unions Savings and loans Commercial banks Auto dealers

7. Lenders Borrowers usually pay lower APRs when their loans are approved through credit unions Borrowers have the option to finance the car from auto dealers but may not receive a good auto loan deal

8. Variables of Loan Down payment o Amount of money being paid for the automobile at the time of purchase Negotiated price o The price being paid for the automobile agreed upon by the seller and the buyer

9. Variables of a Loan Principal Loan Amount o Amount of the loan for the automobile after subtracting the down payment and/or trade-in from the negotiated price o Does not include interest and fees that may apply Trade-in o Amount of money received from trading in an automobile Subtracted from the negotiated price of the automobile

10. Variables Time period o Amount of time the loan will be repaid o Expressed in months APR o Measures the cost of credit on a yearly basis expressed as a percentage

11. More Variables Total purchasing cost o Down payment, trade-in, loan amount Total cost of the loan o Total of principal loan amount, interest, and other fees