0
The car can always be repossessed if the owner stops paying off the loan.
Wiki User
∙ 15y ago
Add your answer:
Earn +20 pts
What is the function of interest rates?
One word: PROFIT. That's the short answer. The long answer is the function of interest rates are tied to risk. A bank, lender, loan shark, etc... set their interest rates based on the perceived risk inherent with the loan. That is why personal loans and credit cards carry a higher interest rate than car or boat loans which are still higher than property loans. Personal loans are only a promise to pay with no collateral to fall back on while a home or building is the collateral for a property loan; there is an avenue of recourse for the bank. The more opportunity the lender has to lose money, the higher the interest rate. The other side of this has to do with investing and the risk/reward scenario. Various investments have different rates of return as the risk is different in each case. Stocks are risky and can deliver a great return or even negative return. Government bonds deliver a guaranteed return with no risk but the return is usually quite low.
How does federal reserve increase?
If the government loans a bank $1million the bank will report $1 million dollars on the books. Once the bank opens for business and accept deposits from locals the bank increase the amount of money they report. Also the federal reserve has a system called the debit reserve ratio. This ratio allows the bank to lend a large percentage of the local account holders. Often times banks are allowed to only hold 3-6% of it's deposites (local bank account holders). So if a bank has $1million dollars it only has to have $60,000 inside of the bank, the rest of the money can be invested and lended to credit costumers. On the balance sheet at the end of the year assets will read: $1million from the federal reserve $940,000 worth of investments(credit cards, home loans, car loans business loans) $60,000 Cash Plus The amount of accrued(real time collective information) deposits, given to the bank by people in the community that allow the bank to hold their money. The total for the bank that started with $1million can grow to over $2million within a quarter(3 months) If the government loans a bank $1million the bank will report $1 million dollars on the books. Once the bank opens for business and accept deposits from locals the bank increase the amount of money they report. Also the federal reserve has a system called the debit reserve ratio. This ratio allows the bank to lend a large percentage of the local account holders. Often times banks are allowed to only hold 3-6% of it's deposites (local bank account holders). So if a bank has $1million dollars it only has to have $60,000 inside of the bank, the rest of the money can be invested and lended to credit costumers. On the balance sheet at the end of the year assets will read: $1million from the federal reserve $940,000 worth of investments(credit cards, home loans, car loans business loans) $60,000 Cash Plus The amount of accrued(real time collective information) deposits, given to the bank by people in the community that allow the bank to hold their money. The total for the bank that started with $1million can grow to over $2million within a quarter(3 months)
What is the difference between buying a car with a loan and leasing a car?
When you lease a car, you don't own it as you do when you buy one with a loan. When Leasing you are only paying for the time you use the vehicle, Imagine the Car cost $10,000 when the car is returned in 3 years time the finance company may say the car is going to be worth $5,000 you are only financed on the remaining $5,000 thus making your monthly payments cheaper, where as if you buying the car outright then you will be financed for the whole car, add in its depreciation it often works out cheaper to lease the car
Suppose a retailer promotes its store by advertising a drawing for a free car. Is this car free because the winner pays zero for it?
The car is not "free" because it costs money, labor, and time to produce the car.
Which contributes more to GDP the production of an economy car or the production of a luxury car?
Luxury car as the auto maker makes more profit on the expensive car, thus putting more back into the economy.
Are auto loans secured loans?
Yes, they are. An auto loan is secured loan based on the collateral of your vehicle. If you don't pay the loan they will unfortunately come take your car away.
What core differences are there between a secured and unsecured loan?
Secured and unsecured are the two main types of loans. Secured loans require the borrower to give some form of security to the lender, like a home or car. Unsecured loans do not require any kind of collateral.
Where can one find secured loans for bad credit?
One can find secured loans for bad credit from banks or other lending institutions, as car loans or real estate loans. The borrower needs to present a collateral, such as a car, property, savings accounts, or stocks, as a guarantee for prompt payment.
What loans are classified as secured loans in a banks portfolio?
Secured loans are those which include some sort of collateral. this is to ensure that if by default you are unable to pay the loan back, the bank still receives some revenue. Such as a car loan or property loan. Secured Loans are defined as the lending companies provide the loan at the risk of the borrower.
Is a car secured property in bankruptcy?
If there is a loan which used the car as collateral, yes.
What does secure loans mean?
A secured loan is a loan in which the borrower declares an asset (e.g. a car or property) as collateral for the loan, which then becomes a secured debt owed to the creditor who issues the loan. The debt is thus secured against the collateral - in the event that the borrower defaults on the loan, the creditor takes possession of the asset used as collateral and may sell it to satisfy the debt by regaining the amount originally lent to the borrower.
Is an auto loan a personal loan?
An auto loan and a personal loan are both loans. Personal loans can be secured or unsecured. Secured meaning that there is some form of collateral to back up the loan in the event that the borrower defaults. Unsecured loans have no collateral which usually translates into higher interest rates due to the added risk on the lender. An auto loan may carry a lower interest rate due to it being secured; if you don't make the payments you lose the car.
How do unsecure personal loans differ from secure ones?
The difference between an unsecured loan, and a secured loan is pretty substantial. A house, or a car is used as collateral and therefore secures the loan for the lender. For an unsecured loan, there is no collateral available to the lender.
What is the difference between secured and unsecured loan?
A secured loan would be a car loan for example. The car is used as collateral for the loan. A signature loan would be an unsecured loan. The only thing the lender would do is look at your credit worthiness and make you a loan based on you simply saying you'll pay them back.
What are secure claims in chapter 13?
Secured claims are those debts that have been secured by collateral. Because of this, the creditor can take the collateral and sell it, if the debt isnâ??t paid. Some examples are home mortgages and car loans. With Chapter 13, the loan would have to be paid for these claims if the owner wishes to keep the property.
Where can one get a secured loan?
Most banks will offer secured loans as part of a savings or CD plan. Car/title loans and payday loans are effectively secured loans with the vehicle and the check draft serving as the security.
Why are secured loans an important method of lending for financial institutions?
Because most of the borrowers don't pay their loan. Secured loans means, it's a loan with collateral. So, even though the borrower don't pay for the loan, banks or other financial institutions will have something in return even though the borrower didn't pay the loan amount. But there are some lending companies like Capitalife who's offering different kinds of loans, like personal loan, business loan and car loan with no collateral needed.
