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
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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