Write the question and the answer

1. Daniel buys goods on credit or borrows money. Which term identifies Daniel?   

A.  Creditor  B.  Debtor  C.  Loanee  D.  Secured Party 

2. Stephen uses his home as security for a loan. Which term describes the use of his home in this transaction?   

A.  Collateral  B.  Credit  C.  Interest  D.  Surety 

Criteria of Negotiability How to compute interest using different

methods

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Warm up Review Methods of Calculating Interest Notes-Loan types and Loan Procedures Research Credit Cards Study your notes for objectives 6.02—

Yesterday and Today’s notes

Agenda

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Types of Loans and Procedures for

Borrowing MoneyUnit C Basic Business Law

Objective 6.02

Secured Loan

Creditors obtain an interest in something of value

1. Collateral – Property that is the subject of the loan

2. Cosigner – Helps protect a loan when a borrower’s credit rating is poor

3. Secured Party – Lender or seller who holds secured interest

4. Repossession – Property is returned because of non-payment

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Types of Loans

Unsecured

Creditors obtain no collateral for loan

1. No Collateral2. Creditors make sure that debtor is reliable and

able to pay back loan3. Example (Credit Cards)

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Types of Loans

Single Payment Loan

Debtor pays off loan in one payment

1. Promissory Note - Written promise to repay with interest

2. Installment Loan - Paid in regular payments

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Types of Loans

Truth in Lending Act

Regulation Z

1. Actual cost of finance charge must be known2. Annual percentage rate3. Liable for $50 unauthorized credit card

purchases made prior to notification

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Types of Loan Regulations

Equal Credit Opportunity Act

1. Applying for credit2. Granted only on the ability to repay3. Evaluation of application4. Cannot discriminate based on gender, age,

ethnicity, or religion5. Acceptance and rejection

¨ Based on income, current debts, or poor credit record

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Types of Loan Regulations

21

Procedures for Borrowing Money

Loan ApplicationConsideration

Reputation for paying bills Source of regular income Competency Number of dependants Use of loan and for how long

Rules Cannot ask sex, race, national origin, or religion Cannot refuse on basis of sex or marital status Marital status may/may not be asked Do not have to disclose income from alimony or child

support unless relying on income May not be prohibited from using given names (birth)

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Procedures for Borrowing Money

Interview Reference and credit check

Request for credit Inaccuracy of credit report

Acceptance/Rejection Must inform client within 30 days If denied, must provide, upon request, reasons for

denial within 60 days Cannot close account due to change in marital

status, unless person unwilling/unable to pay

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Procedures for Borrowing Money