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Source of Loan Answer Description Commercial banks Consumer finance companies A. B. C. Credit unions These institutions are not high volume consumer loan lenders. These are nonprofit organizations whose loan interest rates are relatively low. These institutions are popular with those who have poor credit ratings, but offer only high interest rates whose maximums are state-regulated. Using these institutions is essentially borrowing from oneself D. Savings and loan associations Sales finance companies E. These institutions generally offer higher interest rates than many other types of institutions because the vendor of the item being financed arranges the financing and must be paid for that service. These institutions provide the most consumer loans. Life insurance companies F. You are going to make a substantial purchase. You have enough money to pay cash, but don't know if that's the way to make best use of your assets. Maybe you should take out an installment loan to make the purchase and Invest the cash you would otherwise have used to pay for it. Use the information provided to complete the following worksheet and analyze how the numbers work out most favorably for you. For simplicity, compounding is ignored in calculating both the cost of interest and interest earnings. (Note: Enter your dollar answers rounded to the nearest two cents and precede numbers that are less than zero (0) with a minus sign (-).] Buy On Time or Pyy Cash Cost of Borrowing Terms of the loan a. Amount of the loan $13,000 $299.39 b. Length of the loan (in years) c. Monthly payment Total loan payments made per month months) Less: Principal amount of the loan Total interest paid over life of loan Tax considerations: - Is this a home equity loan? - Do you itemize deductions on your federal tax return? What federal tax bracket are you in? Taxes saved due to interest deductions %) Total after-tax interest cost on the loan yes Cost of Paying Cash Annual interest earned on savings