Single-Payment versus Installment Loans, and Fixed-Rate versus Variable-Rate Loans Payments on consumer loans are descri

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Single Payment Versus Installment Loans And Fixed Rate Versus Variable Rate Loans Payments On Consumer Loans Are Descri 1 (131.41 KiB) Viewed 16 times

Single-Payment versus Installment Loans, and Fixed-Rate versus Variable-Rate Loans Payments on consumer loans are described by the terms of the loan. When the loan is paid is one factor. An installment loan is paid either periodically over the life of the loan, usually monthly, and a single-payment loan is what the name implies: a loan whose entire balance is paid at once, usually ranging from a month to a year after the loan is made. Interest charged on the loan is another factor. Rates are either fixed or variable. A fixed rate is the same throughout the life of the loan. A variable rate may change over the life of the loan and is usually tied to current market conditions. Teresa and Beth both needed loans, but they had different reasons, personalities, and financial positions. They each had to choose between obtaining a single-payment or an installment loan. Teresa Teresa wanted to rent a share in a ski house for the upcoming winter, a six-month season. The house owner would not allow Teresa to pay the rent in six equal payments over the course of the ski season and, instead, required full payment up front. Teresa found an investment opportunity promising a 7% annual return. She also found a loan with a 4% annual interest rate. She decided to take out the loan to pay the landlord the full amount of the rental. Every month, Teresa planned to deposited one sixth of the loan amount (or what would have been the monthly rental payment) into the investment and take the chance that the investment would return what it promised. Teresa most likely took out a single-payment loan because she made best use of the rental money an installment didn't want to write a lot of checks Beth needed a loan and knew that she would be less likely to default it subject to monthly, fixed payments. Beth most likely took out an installment loan because saving is easier for her than paying is a single-payment she only has to pay part of the loan each month Darnell and Jacques both needed loans, but they had different reasons, personalities, and financial positions. They each had to choose between obtaining a fixed-rate or variable-rate loan. Darnell took out a ten-year loan. He paid $368 every month for 120 months, until the loan was paid off. Darnell most likely took out a loan because the monthly payment and number of payments - didn't change fixed-rate variable-rate changed Jacques needed a long-term loan, somewhere between 15 and 30 years. He learned that the longer the term, the fewer rate options he had. Jacques finally had to go with the 30-year loan. Jacques most likely took out a loan because fixed-rate variable-rate the long term probably assured a variable rate interest rates were holding steady