Business College

When applying for a loan, what should you do?
A) You should borrow from an institution close to your home.
B) You should wait until you have a long credit history.
C) You should go to a state that has low interest rates.
D) You should shop around for the best overall deal.

Answers

Answer 1

Answer: D). You should shop around for the best overall deal.

Explanation: It makes the most sense to me and is what I would do compared to the other options. Like I don't think I would go out of state for a loan, and obviously waiting for a long credit history isn't beneficial. You can have good credit without having a long credit history. Borrowing from somewhere near your house only is convenient for travel distance.  Sorry if I'm wrong!!

Answer 2

When applying for a loan, you should shop around for the best overall deal. This means comparing different lenders and loan product. Therefore, the correct answer is D.

This means to find the one that offers the lowest interest rate, the most favorable terms, and the best repayment plan that suits your needs.

A loan is a sum of money that is borrowed and expected to be paid back to the lender with interest over a set period of time. Loans are typically offered by financial institutions such as banks, credit unions, and online lenders,

Therefore, it is recommended to research and compare different loan options to find the best deal that suits your financial situation and needs.

Thus, the ideal selection is option D.

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Related Questions

5) An investor obtained a fully amortizing mortgage five years ago for $95,000 at 11 percent for 30 years. Mortgage rates have dropped, so that a fully amortizing 25-year loan can be obtained at 10 percent. There is no prepayment penalty on the mortgage balance of the original loan, but three points will be charged on the new loan and other closing costs will be $2,000. All payments are monthly.
a. Should the borrower refinance if they plan to own the property for the remaining loan term? Assume that the investor borrows only an amount equal to the outstanding balance of the loan.

b. Would your answer to part (a) change if the investor only planned to own the property for five more years?

Answers

a. If the new loan offers a lower monthly payment and the total savings from the lower payment outweigh the costs of refinancing (points and closing costs), it may be beneficial for the borrower to refinance.

b.  If the investor plans to own the property for only five more years, the decision to refinance becomes different.

a. To determine whether the borrower should refinance, we need to compare the costs and benefits of the new loan with the remaining balance of the original loan.

Remaining balance of the original loan after 5 years:

The loan term was 30 years, and 5 years have passed, so the remaining loan term is 30 - 5 = 25 years.

Using an amortization schedule or mortgage calculator, we can calculate the remaining balance on the original loan after 5 years.

Cost of refinancing:

The new loan is for $95,000 (equal to the outstanding balance of the original loan). However, three points will be charged on the new loan, which is 3% of the loan amount. Therefore, the points charged will be 3% of $95,000, which is $2,850. Additionally, there are closing costs of $2,000.

Monthly payments:

We need to compare the monthly payments on the original loan with the new loan.

Original loan: Using the original loan details ($95,000 at 11% for 30 years), we can calculate the monthly payment using a mortgage calculator.

New loan: Using the new loan details ($95,000 at 10% for 25 years), we can calculate the monthly payment using a mortgage calculator.

After calculating the monthly payments for both loans, we can compare them to determine if there is a significant difference.

If the new loan offers a lower monthly payment and the total savings from the lower payment outweigh the costs of refinancing (points and closing costs), it may be beneficial for the borrower to refinance.

b. If the investor plans to own the property for only five more years, the decision to refinance becomes different. In this case, the focus should be on the interest savings during the ownership period rather than the total savings over the loan term.

Calculate the interest savings:

Calculate the total interest payments for the remaining term of the original loan (20 years) using the original loan details.

Calculate the interest payments for the new loan over the planned ownership period (5 years) using the new loan details.

Compare the interest savings from the new loan with the costs of refinancing (points and closing costs).

If the interest savings outweigh the refinancing costs, it may still be beneficial to refinance even if the monthly payment doesn't significantly decrease.

It is important to note that these calculations provide a general framework for evaluating the decision to refinance. Other factors, such as individual financial circumstances, future plans, and market conditions, should also be considered. Consulting with a mortgage professional can provide more personalized advice based on specific details and goals.

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