1. Copyright © 2015, 2011, and 2007 Pearson Education, Inc. 1 Chapter 12 Business and Consumer Loans Section 4 Personal Property Loans

2. Copyright © 2015, 2011, and 2007 Pearson Education, Inc. 2 Define Personal Property and Real Estate Personal property – items that can be moved from one location to another: an automobile, a boat, or a stereo Real estate or real property – items that cannot be moved: land and homes

3. Copyright © 2015, 2011, and 2007 Pearson Education, Inc. 3 Personal Property Loans Banks, credit unions, finance companies, and many other types of companies make money through personal property loans Typically repaid, or amortized, using monthly payments If buyer is not able to make the payments as promised, the lender must repossess the personal property

4. Copyright © 2015, 2011, and 2007 Pearson Education, Inc. 4 Use the Formula for Amortization to Find Payment The periodic payment needed at the end of each period to amortize a loan with interest i per period, over n periods, is found by using the following formula. Payment Loan amount = Number from amortization table ×

5. Copyright © 2015, 2011, and 2007 Pearson Education, Inc. 5

6. 6 Example Page 491 Quick Check 1

7. Copyright © 2015, 2011, and 2007 Pearson Education, Inc. 7 Example Find (a) the monthly payment, (b) the portion of the first payment that is interest, (c) the balance due after one payment, (d) the interest owed for the second month, and (e) the balance after the second payment.

8. Copyright © 2015, 2011, and 2007 Pearson Education, Inc. 8 Set Up an Amortization Table It is sometimes helpful to display payment information in the form of a table called an amortization schedule.

9. Copyright © 2015, 2011, and 2007 Pearson Education, Inc. 9 Example Page 495 Problem 19

10. Copyright © 2015, 2011, and 2007 Pearson Education, Inc. 10 Example (cont)

11. Copyright © 2015, 2011, and 2007 Pearson Education, Inc. 11 Loan Payoff Table Loan payoff table – is an alternative to the amortization table Different format than amortization table: APR is down the left column and number of months across the top Personal property loans sometimes have higher interest rates (people are more likely to default on a smaller item than a house)

12. Copyright © 2015, 2011, and 2007 Pearson Education, Inc. 12 Loan Payoff Table

13. Copyright © 2015, 2011, and 2007 Pearson Education, Inc. 13 Find Monthly Payments Payment Loan amount = Number from loan payoff table ×

14. Copyright © 2015, 2011, and 2007 Pearson Education, Inc. 14 Example Page 494 Problem 11