 a type of credit that is typically started at the time of purchase for a specific asset  Common for purchases of $1,000 or more  Ex. car, motorcycle

 most of us do not have the money saved to pay cash for large purchases  we may consider it wiser to invest it or use it for other needs

 a portion of the purchase paid up front by the buyer  the loan makes up the difference between the total price and the down payment

 You are saving for your first car. When you get your license, you have $2,000 saved. The car you want to buy is $8,000.  You might make a $2,000 down payment and take a personal loan for the $6,000 difference.

 the details of the repayment schedule set up by the lender a) the amount of the payment (a portion applied to interest, the rest toward principal) b) interest rate charged c) the number of months you will need to make payments to repay entire loan (typically 24 to 72 months)

 Banks, credit unions, other financial institutions and even major auto companies offer personal loans.  Companies that sell expensive items such as appliances and recreational equipment may make financing available.

 Cosigner – someone who agrees to sign the loan documenting responsibility for repaying the loan in the event that the other individual stops making payments  You will be required to provide info that will allow the lender to make a judgment about whether or not you will be able to pay back the loan Income Housing Expenses SS# (credit history)

 Many businesses are prepared to approve/decline on-the-spot (encourages purchase)

 Dollar amount of the loan  Interest rate i. APR – Annual Percentage Rate 1.required by law to be calculated the same way by lenders 2.factors in all costs of financing 3.this is what you want to compare when you shop around for rates

 Loan repayment schedule (including maturity date – date at which the loan will be completely repaid)  Secured or unsecured

I. Secured loans – collateral pledged that can be resold if you default on the loan 1.Collateral – an asset, usually the item purchased, that is repossessed 2.Default – to stop making payments II. Unsecured loans – no collateral pledged, good credit history required