Practice Exercise APPLY TO FOR YOUR EQUITY LOANS BRIDGE | HOME A FINANON FOR YOU AVAILABLE) Thinking of Borrowirjtoltvesel WE CAN HELP? A CAR TALK TO US TODAY ABOUT OPSLAAST PROTECTION Matching Lending Products with Customer Situations Below you will find a list of lending product options and a series of customer situations. Choose the lending product option that best meets the needs of the customer while minimizing the level of risk to the lending institution. Explain why you have made each choice. Keep in mind that it is possible to use one or more of the lending product options in several of the customer situations. Lending Product Options 1. Fixed repayment loan with a 20-year amortization (second mortgage) 2. Interest-only demand loan 3. Home equity line of credit 4. Everyday Bank credit card 5. Fixed repayment loan with a 7-year amortization, bi-weekly payments, and a variable interest rate 156 CS Scanned with CamScanner Other Lending Product Options 157 6. Personal line of credit 7. Overdraft protection S Fixed repayment loan with a 7-year amortization, bi-weekly payments, and a fixed interest rate 9. Student line of credit Customer Situations 1. Adam works in construction and has just purchased a new Dodge Ram pickup truck for $42,000. He gets paid every two weeks, and he would like his payments taken out of his account on the day he gets paid. The interest rates are expected to go up shortly, and he would like to mini- mize his payments if possible. Product Recommendation: Rationale: 2. Nicole runs a small computer repair company. She buys most of the parts she requires to fix her customers' computers online and rarely spends more than a few hundred dollars. Her customers always pay her when she returns their computers, sich is usually within a few days of receiving the required parts. Product Recommendation: Rationale: 3. Alex has a summer job working on a ship that transports supplies to towns and villages along the coast of Hudson Bay. He receives a pay cheque every week but often cannot find a bank to deposit it in for sev- eral weeks. He has several payments coming out of his account each month, which total about $800, and he is concerned that he will not have the funds in his account to cover them. Product Recommendation: Rationale: 4. For the past three years, Jake has been saving his money so he can pay for his tuition at university. He is hoping to become electrical engi- neer, and he thinks he has enough saved for three out of the four years. He is not sure that he will be able to earn enough money during his summer breaks to pay for the last year of school, which he expects to cost about $18,000. He wants to make sure that he has a backup plan before he begins. His parents have offered to help if needed, but Jake does not want to burden them if he can help Product Recommendation: Rationale: CS Scanned with CamScanner 158 CHAPTER 7 5. Sarah just learned that her new ski boat will be ready for pick up text week. This was a surprise since it was not due to be delivered for boat will cost her $28,000. She is hoping that she can minimize her another month, so Sarah is off to the bank to arrange financing The payments, and she would like to arrange the payments to come out of her account every two weeks to match her payroll deposit. The interest rates are currently high, but they are expected to drop in the next few investment opportunity that could double in value in a year. He would like to invest $50,000, but he is a bit short on funds. He is considering reduce the effect on his cash flow. He expects to sell the investment at Hannah owns a home in Barrie. The home is worth $320,000 with a small mortgage on it ($50,000), and she has the opportunity to purchase the end of the year and repay the loan. Product Recommendation: Rationale: months. Product Recommendation: Rationale: borrowing the money. He hopes to minimize his payments so he can 7. Kelly's aunt recently passed away and left her a large sum of money, which she will receive in about six months. Kelly makes a good income and is financially well off. She doesn't really need the money, so she is planning to give some of the money to her two children, some to charity, and take a trip with the rest. Kelly's children are both thinking about buying a house in the next month, so she would like to borrow some money now to cover their down payments and then repay it when the inheritance comes through. Product Recommendation: _ Rationale: 8. The company Viji worked fur recently closed, and she lost her high- paying accounting position. She has acquired a new job. However, her income is substantially lower , and she is having difficulty keeping up with all her credit payments, which include a mortgage, a car loan, a small line of credit, and three credit cards. All three credit cards are currently at their limits. Her house is worth $420,000; her mortgage is $173,000; and the total of all her additional debt is $68,000, which she is hoping to consolidate into one lower monthly payment. Product Recom endation: Rationale: 9. CS Scanned with CamScanner Other Lending Product Options 159 the vacant lot beside her house for $85,000. If she owned the property, she could build the lap pool she has always wanted and use the rest of the land for a vegetable garden. Both Hannah and her husband have high-paying jobs, and their combined TDSR is very low. Most of their money is tied up in RRSPs and their house, so they require a loan to purchase the land. Product Recommendation: Rationale: 10. Last summer Cheryl wrote a book about her solo journey to the North Pole by snowshoe. Several weeks ago she sold the movie rights for half a million dollars, and she will receive the money in two months. Cheryl is planning to use some of the money to purchase a sailboat, which she will use to sail around the world. She would like to pick the boat up next week, so she needs to borrow some money. She intends to repay the loan when her cheque from the movie studio arrives. Product Recommendation: Rationale: CS Scanned with CamScanner Practice Exercise APPLY TO FOR YOUR EQUITY LOANS BRIDGE | HOME A FINANON FOR YOU AVAILABLE) Thinking of Borrowirjtoltvesel WE CAN HELP? A CAR TALK TO US TODAY ABOUT OPSLAAST PROTECTION Matching Lending Products with Customer Situations Below you will find a list of lending product options and a series of customer situations. Choose the lending product option that best meets the needs of the customer while minimizing the level of risk to the lending institution. Explain why you have made each choice. Keep in mind that it is possible to use one or more of the lending product options in several of the customer situations. Lending Product Options 1. Fixed repayment loan with a 20-year amortization (second mortgage) 2. Interest-only demand loan 3. Home equity line of credit 4. Everyday Bank credit card 5. Fixed repayment loan with a 7-year amortization, bi-weekly payments, and a variable interest rate 156 CS Scanned with CamScanner Other Lending Product Options 157 6. Personal line of credit 7. Overdraft protection S Fixed repayment loan with a 7-year amortization, bi-weekly payments, and a fixed interest rate 9. Student line of credit Customer Situations 1. Adam works in construction and has just purchased a new Dodge Ram pickup truck for $42,000. He gets paid every two weeks, and he would like his payments taken out of his account on the day he gets paid. The interest rates are expected to go up shortly, and he would like to mini- mize his payments if possible. Product Recommendation: Rationale: 2. Nicole runs a small computer repair company. She buys most of the parts she requires to fix her customers' computers online and rarely spends more than a few hundred dollars. Her customers always pay her when she returns their computers, sich is usually within a few days of receiving the required parts. Product Recommendation: Rationale: 3. Alex has a summer job working on a ship that transports supplies to towns and villages along the coast of Hudson Bay. He receives a pay cheque every week but often cannot find a bank to deposit it in for sev- eral weeks. He has several payments coming out of his account each month, which total about $800, and he is concerned that he will not have the funds in his account to cover them. Product Recommendation: Rationale: 4. For the past three years, Jake has been saving his money so he can pay for his tuition at university. He is hoping to become electrical engi- neer, and he thinks he has enough saved for three out of the four years. He is not sure that he will be able to earn enough money during his summer breaks to pay for the last year of school, which he expects to cost about $18,000. He wants to make sure that he has a backup plan before he begins. His parents have offered to help if needed, but Jake does not want to burden them if he can help Product Recommendation: Rationale: CS Scanned with CamScanner 158 CHAPTER 7 5. Sarah just learned that her new ski boat will be ready for pick up text week. This was a surprise since it was not due to be delivered for boat will cost her $28,000. She is hoping that she can minimize her another month, so Sarah is off to the bank to arrange financing The payments, and she would like to arrange the payments to come out of her account every two weeks to match her payroll deposit. The interest rates are currently high, but they are expected to drop in the next few investment opportunity that could double in value in a year. He would like to invest $50,000, but he is a bit short on funds. He is considering reduce the effect on his cash flow. He expects to sell the investment at Hannah owns a home in Barrie. The home is worth $320,000 with a small mortgage on it ($50,000), and she has the opportunity to purchase the end of the year and repay the loan. Product Recommendation: Rationale: months. Product Recommendation: Rationale: borrowing the money. He hopes to minimize his payments so he can 7. Kelly's aunt recently passed away and left her a large sum of money, which she will receive in about six months. Kelly makes a good income and is financially well off. She doesn't really need the money, so she is planning to give some of the money to her two children, some to charity, and take a trip with the rest. Kelly's children are both thinking about buying a house in the next month, so she would like to borrow some money now to cover their down payments and then repay it when the inheritance comes through. Product Recommendation: _ Rationale: 8. The company Viji worked fur recently closed, and she lost her high- paying accounting position. She has acquired a new job. However, her income is substantially lower , and she is having difficulty keeping up with all her credit payments, which include a mortgage, a car loan, a small line of credit, and three credit cards. All three credit cards are currently at their limits. Her house is worth $420,000; her mortgage is $173,000; and the total of all her additional debt is $68,000, which she is hoping to consolidate into one lower monthly payment. Product Recom endation: Rationale: 9. CS Scanned with CamScanner Other Lending Product Options 159 the vacant lot beside her house for $85,000. If she owned the property, she could build the lap pool she has always wanted and use the rest of the land for a vegetable garden. Both Hannah and her husband have high-paying jobs, and their combined TDSR is very low. Most of their money is tied up in RRSPs and their house, so they require a loan to purchase the land. Product Recommendation: Rationale: 10. Last summer Cheryl wrote a book about her solo journey to the North Pole by snowshoe. Several weeks ago she sold the movie rights for half a million dollars, and she will receive the money in two months. Cheryl is planning to use some of the money to purchase a sailboat, which she will use to sail around the world. She would like to pick the boat up next week, so she needs to borrow some money. She intends to repay the loan when her cheque from the movie studio arrives. Product Recommendation: Rationale: CS Scanned with CamScanner