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1. Barry is going to post-secondary school for three years. Should Barry get a Student Loan or Personal Line of Credit to pay for his education? Why? 2. Larry needs a new fridge. He does not have the money, but needs a fridge. Should Larry use a Credit Card, Installment Plan or Payday Loan to purchase the fridge? Why? 3. When would you would use a Personal Loan? Why would you choose a Personal Loan over other methods of Credit? 4. When would you would use a Mortgage? Why would you choose a Mortgage over other methods of Credit?

1. Barry is going to post-secondary school for three years. Should Barry get a Student Loan or Personal Line of Credit to pay for his education? Why? 2. Larry needs a new fridge. He does not have the money, but needs a fridge. Should Larry use a Credit Card, Installment Plan or Payday Loan to purchase the fridge? Why? 3. When would you would use a Personal Loan? Why would you choose a Personal Loan over other methods of Credit? 4. When would you would use a Mortgage? Why would you choose a Mortgage over other methods of Credit?

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Comparing Types of Loans Payday loans are much more expensive than other types of loans, including credit cards. But how much are you really paying? How does the cost of a payday loan compare with taking a cash advance on a credit card, using overdraft protection on your bank account or borrowing on a line of credit? Let's compare the cost of using different types of loans. We'll assume that you borrow $300, for 14 days. Note the considerable difference in the cost of each type of loan. Comparing the cost of a $300 loan, taken for 14 daysı Payday loan Credit Card Borrowing protection from a line of credit Overdraft Cash advance Interest $2.13 $2.42 $1.15 Applicable fees $69.00 $2.00 Total cost of loan $69.00 $4.13 $2.42 $1.15 Cost of the loan 600% 36% per 21% per 10% per expressed percentage of the amount borrowed3 as a per year year year year Comparing the cost of a payday loan with other types of short-term loans Based on a $300 loan taken for 14 days $60.00 $50.00 $50.00 $40.00 E $30.00 $20.00 $10.00 $4.13 $1.15 $2.42 $0.00 Cash advance on a credit card Borrowing from a line of credit Overdraft protection on a bank account Payday loan Type of loan Cost of lean
Transcribed Image Text:Comparing Types of Loans Payday loans are much more expensive than other types of loans, including credit cards. But how much are you really paying? How does the cost of a payday loan compare with taking a cash advance on a credit card, using overdraft protection on your bank account or borrowing on a line of credit? Let's compare the cost of using different types of loans. We'll assume that you borrow $300, for 14 days. Note the considerable difference in the cost of each type of loan. Comparing the cost of a $300 loan, taken for 14 daysı Payday loan Credit Card Borrowing protection from a line of credit Overdraft Cash advance Interest $2.13 $2.42 $1.15 Applicable fees $69.00 $2.00 Total cost of loan $69.00 $4.13 $2.42 $1.15 Cost of the loan 600% 36% per 21% per 10% per expressed percentage of the amount borrowed3 as a per year year year year Comparing the cost of a payday loan with other types of short-term loans Based on a $300 loan taken for 14 days $60.00 $50.00 $50.00 $40.00 E $30.00 $20.00 $10.00 $4.13 $1.15 $2.42 $0.00 Cash advance on a credit card Borrowing from a line of credit Overdraft protection on a bank account Payday loan Type of loan Cost of lean
1. Barry is going to post-secondary school for three years. Should Barry get a Student Loan or Personal Line of Credit to pay for his education? Why? 2. Larry needs a new fridge. He does not have the money, but needs a fridge. Should Larry use a Credit Card, Installment Plan or Payday Loan to purchase the fridge? Why? 3. When would you would use a Personal Loan? Why would you choose a Personal Loan over other methods of Credit? 4. When would you would use a Mortgage? Why would you choose a Mortgage over other methods of Credit?
Transcribed Image Text:1. Barry is going to post-secondary school for three years. Should Barry get a Student Loan or Personal Line of Credit to pay for his education? Why? 2. Larry needs a new fridge. He does not have the money, but needs a fridge. Should Larry use a Credit Card, Installment Plan or Payday Loan to purchase the fridge? Why? 3. When would you would use a Personal Loan? Why would you choose a Personal Loan over other methods of Credit? 4. When would you would use a Mortgage? Why would you choose a Mortgage over other methods of Credit?
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