Caroline Ulm

Personal Finance- Block 8

April 22nd, 2015

Loans Webquest
Use the websites indicated to answer the questions about car loans and student loans.
Car Loans
http://www.personalfinance.duke.edu/make-todays-decisions/transportation/what-are-ins-andouts-car-loans
1. How are car loans generally paid off?
Car loans are generally paid off in monthly instalments.
2. What other factors must be considered besides the monthly payment for your car loan when
determining if a car is affordable?
Other factors that must be considered are taxes, insurance costs, fuel costs, depreciation
of value, repair costs, and maintenance costs.
3. Define the following terms:
a. APR= Annual Percentage Rate- the rate at which you pay interest annually on a loan.
b. Down Payment= the amount of money you originally pay for your car & is not
borrowed.
c. Additional Finance Charges= additional fees that a loaner may charge in addition to the
APR.
d. Loan Term= the length of time for the car loan to be paid off in.
e. Prepayment Penalty= a fee that the lender may charge you for if you pay off your loan
early in order to compensate for the loss of interest.
4. How does your credit score affect your APR?
Your credit score affects what interest rate (APR) you will have. If you have a high credit
score, your APR will be lower than someone with a low credit score.
5. What are 3 lenders you could finance your car through?
You can finance your car through your car dealer, a bank, or through an outside (nonbank/third-party/credit unions) lender.
6. What does the dealer keep until the loan is paid off?
The dealer keeps the cars physical title (meaning they technically own it) until the loan is
paid off.
7. How can you make the process of paying off your car easier?
You can make the process of paying off your car easier by putting down a larger down
payment on the car, making all payments on time, borrowing from a bank or dealer with
low interest rate, (if using the same bank you have a checking account at) setting up
automatic monthly transfers, or paying more each month to pay off the debt quicker &
avoid accumulating interest.
http://www.consumerreports.org/cro/2012/12/how-to-get-the-best-car-loan/index.htm
1. What should you focus on when comparing auto loans?
When comparing auto loans, you should focus not only on the monthly payment, but on
the total loan cost, the APR, the down payment amount, and the term length.
2. Explain the relationship between loan terms, monthly payments, and payments overall.
With lower loan terms, the monthly payment will increase and the payments overall will
decrease. With higher loan term, the monthly payments will go down but the overall
payments will increase.
3. How much should a down-payment be?
A down payment should be at least 15% of the total cost of the car.

4. What website should you use to search for car loan rates?
You should use bankrate.com to search for car loan rates.
5. Why are local banks in a position to offer competitive loan rates?
Local banks are in a position to offer competitive loan rates because they only offer to loan
to people with better credit scores and references, and have specific, conservative loan
policies.
6. Why are credit unions able to offer competitive loan rates?
Credit unions are able to offer competitive loan rates because they are non-profit, only
offer loans to their members, and have fairly low operating costs.
Student Loans
http://www2.ed.gov/offices/OSFAP/DirectLoan/student.html
1. What are Direct Loans?
Direct Loans are low-interest loans for students and parents to help pay for the cost of a
student's education after high school.
2. What are 3 things you can do with Direct Loans?
With Direct Loans, you can borrow directly from the federal government & have a single
contact, have online access to your Direct Loan account information, and choose from
different plan options or switch repayment plans.
3. How do you apply for Direct Loans?
You apply for Direct Loans by filling out the Free Application for Federal Student Aid
(FAFSA), which is usually done online.
4. Define the following in your own words:
a. Subsidized Loan a loan for students that demonstrate financial need and that charges
no interest while they are enrolled in school (at least half-time) or during grace &
deferment periods.
b. Unsubsidized Loan a loan not based on financial need that charges interest at all
times, even when the student is attending school.
c. PLUS Loan unsubsidized loans for parents of dependent or graduate/professional
students used to help pay for attendance costs not covered by other financial
assistance.
d. Consolidation Loan all eligible federal student loans combined into one Direct
Consolidation Loan.
5. What are the current interest rates?
The current interest rates are 4.66% (subsidized), 6.21% (unsubsidized), and 7.21%
(PLUS).
6. What is the maximum amount you can borrow in your first year of college in a Direct Stafford
Loan?
The maximum amount you can borrow in your first year of college $9,500 if youre
independent, or $5,500 if youre dependent.
7. While youre at school, what can you use Direct Loan money for?
While in school, you can use Direct Loan money only to pay for education expenses such
as school charges like tuition, room and board, fees and indirect expenses such as books,
supplies, equipment, dependent child care expenses, transportation and rental or
purchase of a personal computer that are charged by/for the school you are attending.
8. Once you graduate, how long is the grace period in which you are not required to make loan
payments?
The grace period in which you are not required to make a loan payment is 6 months after
graduation.
9. What is the name of the payment plan that most students repay their loans with?
Most students repay their loans with the standard repayment plan.
10.What can you do if you have multiple federal education loans to make repayment easier?

If you have multiple federal education loans, you can make repayment easier by
consolidating them into a single Direct Consolidation Loan.
11.How many years do you generally have to repay your student loans?
Generally, you have 10-25 years to repay your student loans.
12.What does EDA stand for and how does it work?
EDA stands for Electronic Debit Account and it has your bank automatically make your
monthly loan payments for you from your checking or savings account.
13.What are 3 options to choose from if youre having trouble making payments on your student
loans?
If you are having trouble making payments on your student loans, you can change your
repayment plan, get a deferment (if eligible) to allow you to temporarily stop making
payments, or get a forbearance instead of deferment so that you can temporarily stop
making payments, extend the payment time, or make smaller payments.
14.What are 2 consequences of going into default on your loans?
Two consequences of going into default on your loans are having to immediately pay back
the entire amount of the unpaid loan, and loss of eligibility for any other federal financial
assistance.
http://www.pnconcampus.com/
1. What are the eligibility requirements for PNC private student loans (undergraduate)?
The eligibility requirements for PNC private student loans are being an undergraduate
student in a degree program, being enrolled at least half-time at the school you are
attending, being U.S. citizen or permanent resident, having lived in the U.S. for the last
two years, having two years of satisfactory credit history or continuous
income/employment, and having proof of current income.
2. How long can you take to repay private student loans at PNC?
At PNC, you may take up to 15 years to repay private student loans.
3. What does it mean to have your payments deferred?
To have your payments deferred, it means that you will temporarily not have to make
these payments, usually delaying making repayments until six months after graduating.
4. What are the current interest rates (APRs)?
The current interest rates are 3.47% - 10.42% for variable rate loan interest, or 6.49% 12.99% for fixed rate loan interest.
http://www.pnconcampus.com/learningcenter/planningforcollege/whatisfinancialaid/altloansorfed
plus.html
1. What are Federal Parent Loans for Undergraduate Students?
Federal Parent Loans for Undergraduate Students are loan programs for parents of
dependent undergraduate students in which they may borrow every year up to the cost of
education minus any financial aid (government grants, college scholarships, etc.).
2. What are private loans?
Private loans are loans commonly used to pay for college that are available to eligible
creditworthy students and co-signers attending eligible schools.
3. Complete the chart below, then answer: Which loan would be best for you AND WHY?
Consider whether you think you will qualify for federal student aid or if your parents will help
you pay for school when writing your answer.

Borrower

Federal Direct Stafford

Loans
Student

Federal Direct
PLUS Loan
Dependent
student's biological
or adoptive parent
or stepparent

PNC Solution Loan

Student

Lender

U.S. Government

U.S. Government

PNC Bank

Annual Loan
Limit

Undergraduates,
$5,500/$12,500
(dependent/independent);
graduate students,
$20,500; medical school
students, $40,500

Up to 100% of your
cost of attendance
minus other
financial aid

Interest Rate

Undergraduate loans,
4.66%; Graduate loans,
6.21%

7.21%

Discount for
Automated
Payments
Payment
Deferment

0.25%

0.25%

Undergraduates:
$40,000
Graduate Students:
$65,000
Medical Residents
and Bar Exam:
$15,000
Fixed from 6.49% to
12.99% (APRs from
6.26% to 12.99%) or
variable from
LIBOR + 3.30% to
LIBOR + 10.25%
(currently 3.40% to
10.42% APR)
0.5%

No payments due until 6

months after graduation
or enrollment in school
less than half time

No payments due
until 6 months after
graduation or
enrollment in school
less than half time

Repayment
Loans

10 years with flexibility to

extend up to 25 years,
and multiple repayment
options

FAFSA Required?

Yes

10 years with
flexibility to extend
up to 25 years, and
multiple repayment
options
Yes

Credit Check
Required?

No

Yes

Yes

Co-Signer
Required?

No

Satisfactory
Academic
Progress
Required?

Yes

Borrowers with bad

credit history may
be required to apply
with an endorser
Yes

No, unless borrower

is under 17, but may
increase chances of
approval
No

I would choose the Federal Direct Stafford Loans.

No payments due
until 6 months after
graduation or
enrollment in school
less than half time.
Making interest-only
payments while
enrolled in school is
also an option
15 years with
standard repayment

No