Unit 7.1-7.4 Flashcard

Front

What is the Standard Repayment Plan for student loans?

Back

A repayment plan that results in the same monthly payment over the course of the loan, typically for a period of 10 years.

Front

What is a Graduated Repayment Plan?

Back

A repayment plan where payments start lower and gradually increase, usually every two years.

Front

What is an Income-Based Repayment Plan?

Back

A repayment plan that adjusts monthly payments based on the borrower's income and family size.

Front

What is the Pay As You Earn (PAYE) Repayment Plan?

Back

A repayment plan that caps monthly payments at 10% of discretionary income and offers forgiveness after 20 years.

Front

How do you calculate a 20% down payment on a $300,000 home?

Back

Multiply the total cost by 0.20. For example, $300,000 x 0.20 = $60,000.

Front

What is considered a good first step when struggling to pay secured loans?

Back

Call your lender to work out a payment plan.

Front

What type of debt is considered revolving credit?

Back

A credit card.

Front

What is the formula to calculate monthly payments on a loan?

Back

The formula is M = P[r(1 + r)^n] / [(1 + r)^n – 1], where M is the total monthly payment, P is the loan amount, r is the monthly interest rate, and n is the number of payments.

Front

What is the difference between secured and unsecured loans?

Back

Secured loans are backed by collateral, while unsecured loans are not and are based on the borrower's creditworthiness.

Front

What is the impact of a higher credit score on loan approval?

Back

A higher credit score increases the likelihood of loan approval and may result in lower interest rates.