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Understanding Types of Loans Refer to the text and answer each question completely. Complete the mixing information. Place a star Win the box of the loan type that offers students the most benefits. Move this star to the Student Loans box of the loan type offering students the most benefits. 1. 2. 3 Type here Type here Type here 4. Which student loan type offers the most benefits to students and what are they? Type here 5. Why might a parent not want to co-sign a student loan? Explain. Type here 6. What is equity? Type here 7. The Smith family owns a house worth $750,000 and they still owe $567,245 on their mortgage. They decide to take out a home equity loan. How much equity do they have in their house? Explain how you found your answer. Type here Caffeine Q TeacherDate Name Page 6 Understanding Types of Loans Student Loans Student loans offer students and their parents the opportunity to borrow money to pay for a college education. They are designed specifically for college expenses and are often easier to qualify for than other types of loans. Student loans can be federal subsidized, federal unsubsidized, or private loans. The interest rates for federal loans are set by the government. . Federal subsidized loans have low interest rates, are interest-free while students attend college, and have a grace period after students graduate. The grace period allows new graduates a chance to find a job and get settled before starting to pay for the loan. Federal subsidized loans are the most favorable type of student loan. . Federal unsubsidized loans offer low interest rates without the interest-free benefits and grace period that subsidized loans provide. . Private student loans are provided by private institutions, such as banks, online lenders, or credit unions. They are like personal loans and require good credit scores and oftentimes employment. Most students need a co- signer in order to qualify for a private student loan. A co-signer is someone who will take over the loan for a borrower if the borrower fails to make payments. Home Equity Loans A home equity loan allows consumers to borrow a large amount of money by using the equity in their home as collateral to secure the loan. Equity is the difference between the value of a property and how much is still owed on the mortgage of the property. People often use home equity loans to make improvements to their homes, pay for college, or other life events. Because home equity loans are secured loans, borrowers could lose their home to foreclosure if they fail to make payments. DCaffeine Q Teacher