Discussion 4.1 Factors to Consider when shopping for a Loan
List and briefly discuss the different factors to consider when shopping for a loan. How would you determine the total cost of the transaction?
Discussion 4.2 Consumer and Sales Finance Companies
Compare the consumer lending activities of (a) consumer finance companies and (b) sales finance companies. Describe a captive finance company.
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Discussion 4.1 Factors to consider when shopping for a loan
When considering using or taking some credit, they must evaluate the terms available and the costs associated with the credit before making the final decision to take. When shopping for loans, you should not only consider the finance charges associated with it but also consider the collateral, loan maturity, and the total cost of that transaction. Finance charges are an essential thing considered when taking a loan, and it lets you know what you will have to pay to be given the loan and the effective rate of interest that you will be paying for the loan. When it comes to loan maturity, you should ensure the size of the loan and the number of loan payments match with your savings and spending plans. When shopping for a loan, it is vital to consider the total cost of the loan itself and the interest you will have to pay. Collaterals help you what you stand to lose if you cannot pay your loan (Randall et al., 180).
Discussion 4.2 Consumer and Sales Finance companies
Consumer finance companies give both unsecured and secured loans to any individual that qualifies for a loan. They do not accept any deposits but instead get their funds through open market borrowing and stockholders (Randall et al., 179). This makes their interest rates very high. They mainly specialize in giving small loans to very high-risk borrowers. Sales finance companies act as third-party loan takers on behalf of large businesses selling costly items like automobiles and appliances. They purchase installment loans on behalf of their dealers for their products (Randall et al., 179). Captive finance companies are the most significant sales finance companies that belong to manufacturers of some big-ticket merchandise.
Work Cited
Randall, S., Lawrence, G., and Michael, J. PFIN Personal Finance. Cengage, 2020. https://platform.virdocs.com/r/s/0/doc/687931/sp/181431216/mi/576487657?cfi=%2F4%2F4&menu=table-of-contents