Chapter 7: Personal Lans Flashcards Preview

FIN2303 > Chapter 7: Personal Lans > Flashcards

Flashcards in Chapter 7: Personal Lans Deck (20)
Loading flashcards...

Personal loan process

application process
negotiating the interest rate
negotiating the loan contract


application process

you need to provide information from your personal balance sheet and personal cash flow statement to document you ability to repay the loan. - may also need to provide proof of income with T4 slip


Loan contract

which specifies the terms of the loan as agreed to by the borrower and the lender. Specifically, the loan contract identifies the amount of the loan, the interest rate, the repayment schedule, the maturity date, the collateral, and the lender’s rights if payments are late or the loan is not repaid.



To repay the principal of a loan (the original amount borrowed) through a series of equal payments. A loan repaid in this manner is said to be amortized.


maturity or term

With respect to a loan, the life or duration of the loan.



Assets of a borrower that back a loan in the event that the borrower defaults. Collateral is a form of security for the lender.


secured loan

A loan that is backed or secured by collateral.


unsecured loan

A loan that is not backed or secured by collateral.


Payday loan

is a short-term loan provided to you if you need funds in advance of receiving your paycheque. To obtain a payday loan, you write a cheque to the lender for the amount of the loan plus interest and fees. You date the cheque for the day when you will receive your paycheque. The payday loan firm will hold the cheque until that time, and will cash it then because your chequing account will have sufficient funds. After you provide this cheque to the payday loan firm, it provides you with a loan in cash or by transmitting funds into your chequing account.


home equity loan

A loan in which the equity in a home serves as collateral.



The market value of your home less any outstanding mortgage balance and/or debts held by others that are secured against your property.


equity of a home

The market value of a home minus the debt owed on the home.


second mortgage

A secured mortgage loan that is subordinate (or secondary) to another loan.


The Prime Rate

The interest rate a bank charges its best customers.


Before making any car-buying decisions , you shuld take into account the following criteria

- personal preference
- insurance
-resale value
- repair expenses
-financing rate (buying rate)


Negoitating the car

- dealerships price car higher than the value to make it seem like you get a good deal
- negotiating by phone or fax
-trade in tactics
- the value of information (know your car)
-purchasing car online


Financing decisions

you should estimate the amount of the monthly payments. By evaluating your typical monthly income and expenses, you can determine whether you can afford to make the required payments to finance the car. You should conduct this estimate before shopping for a car so that you know how much you can afford.


student loan

A loan provided to finance a portion of a student’s expenses while pursuing post-secondary education.


An advantage of leasing

that you do not need a substantial down payment. In addition, you return the car to the dealer at the end of the lease period, so you do not need to worry about finding a buyer for the car. Leasing will also result in lower monthly car payments since you only have to pay for the portion of the car that you use over the term of the lease.


Leasing a car also has disadvantages

Since you do not own the car, you have no equity investment in it, even though the car still has value. You are also responsible for maintenance costs while leasing it. Keep in mind that you will be charged for any damage to the car over the lease period. Damage may include customizing the car with aftermarket car accessories. Remember, you have no equity investment in the car, and therefore you do not own it.