Loans

Definition of a Loan

Treasury Bonds

• considered low-risk and safe.
• a direct obligation of the Philippine government.

Guarantor

• someone who guarantees to pay the loan in case the borrower fails to do so.

• Types of Loans

  • Business: covers a company’s operating expenses.
    • commonly shorter
    • has a high interest rate than consumer loans.
    • owners of a business are the guarantors of the loan
  • Consumer: for personal, family, or household purposes.
    • does not require a guarantor.
    • some examples are consumer loans:
      • credit card:
        • a short-term loan
        • allows one to make purchases and pay them later.
        • in a way, you’re essentially using the credit card company’s money
      • mortgage
        • a loan that enables one to purchase a property
      • chattel mortgage
        • given to individuals/companies with movable property
      • student loan
        • loan that allows one to pay the cost of college education.
      • personal loan
        • for personal expenses then repaying those funds over time.

• Definition of Terms

  • Collateral: assets used to secure the loan
  • Term: time to pay the loan
  • Amortization Method: method of paying a loan on a periodic basis.
  • Outstanding Balance: the amount of remaining debt at a specified time.

Formulas

• Loan Payment Formula

• Mortgage Loan

• Downpayment

Given:

• 1,200,000$ - amount of loan
• - annual interest rate
• compounded monthly

a.

b.

c.

d.

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• downpayment

a.

b.