q2 w8 Business and Consumer Loans

BUSINESS AND
CONSUMER
LOANS
Q UA RT E R 2 – W E E K 8
ACTIVITY 1
DEFINITION OF TERMS
• Business loan - money lent specifically for a business
purpose. It may be used to start a business or to have a
business expansion
• Consumer loan – money is borrowed for the purpose of
making personal or family purchases
• Collateral - assets used to secure the loan. It may be real-
estate or other investments
• Term of the loan – time to pay the entire loan
• Consumer loans are loans given to individuals for the purpose of
making personal or family purchases while business loans are
loans for businesses. Both types of loans may required a collateral.
The collateral for business and consumer loans may be in the
form of real estate, investment evidence, furniture, or equipment.
Collaterals are used to make the loan a secured loan. Consumer
loans do not usually require a guarantor. Guarantor is an
individual who agree to pay back a loan if the borrower fails to pay
the loan on time. When a business corporation applies for a loan,
the business owner requires to sign as guarantors.
• On the other hand, consumer loans, the bank or the
lending institution may require a credit report, bank
statements, and an income tax returns, and if the lendee is
employed, a certificate of employment and pay slips. for
business loans, the lendee has to submit a credit report, income
tax returns and company’s financial statement. The term of
the business loan usually take shorter terms with a higher
interest than the consumer loan.
IDENTIFY WHETHER THE FOLLOWING IS A CONSUMER
OR BUSINESS LOAN.
• Mr. Agustin plans to have a barbershop. He wants to

borrow some money from the bank in order for him
to buy the equipment and furniture for the
barbershop.
BUSINESS LOAN
OR BUSINESS LOAN.
• Mr. and Mrs. Craig wants to borrow money from

the bank to finance the college education of their
son.
CONSUMER
LOAN
OR BUSINESS LOAN.
• Mr. Alonzo wants to have some improvements on

their 10-year-old house. He wants to build a new
room for their 13-year-old daughter. He will borrow
some money from the bank to finance this plan.
CONSUMER
LOAN
OR BUSINESS LOAN.
• Mr. Samson owns a siomai food cart business. He

wants to put another food cart on a new mall in the
other city. He decided to have a loan to establish the
new business.
BUSINESS LOAN
OR BUSINESS LOAN.
• Roan has a computer shop. She owns 6 computers.

She decided to borrow some money from the bank
to buy 10 more computers.
BUSINESS LOAN
SOLVING PROBLEMS ON BUSINESS AND
CONSUMER LOANS (AMORTIZATION AND
MORTGAGE)
• Amortization Method – method of paying a loan (principal and
interest) on installment basis, usually of equal amounts at regular
intervals
• Mortgage – a loan, secured by a collateral, that the borrower is obliged
to pay at specified terms.
• Chattel Mortgage – a mortgage on a movable property
• Collateral – assets used to secure the loan. It may be a real-estate or
other investments
• Outstanding Balance – any remaining debt at a specified time
EXAMPLE 1
• Mr. Garcia borrowed P1,000,000 for the expansion
of his business. The effective rate of interest is 7%.
The loan is to be repaid in full after one year. How
much is to be paid after one year?
EXAMPLE 2
• A person borrowed P1,200,000 for the purchase of
a car. If his monthly payment is P31,000 on a 5-year
mortgage, find the total amount of interest.
Chattel Mortgage
EXAMPLE 3
•If a house sold for P3,000,000 and the bank
requires 20% down payment, find the amount
of the mortgage.
EXAMPLE 4
• Ms. Rosal bought a car. After paying the down
payment, the amount of the loan is P400,000 with an
interest rate of 9% compounded monthly. The term
of the loan is 3 years. How much is the monthly
payment?
EXAMPLE 5
• Mrs. Se borrowed some money from a bank that
offers an interest rate of 12% compounded monthly.
His monthly amortization for 5 years is P11,122.22.
How much is the outstanding balance after the 12th
payment?
EXAMPLE 6
• Mr. and Mrs. Banal purchased a house and lot worth P4,000,000.
They paid a down payment of P800,000. They plan to amortize the
loan of P3,200,000 by paying monthly for 20 years. The interest rate
is 12% convertible monthly.
• (a) How much is the monthly payment?
• (b) What is the total interest paid?
• (c) What are the principal and interest components of the 51st
payment?
WORD HUNT

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BUSINESS AND

• Mr. Agustin plans to have a barbershop. He wants to

• Mr. and Mrs. Craig wants to borrow money from

• Mr. Alonzo wants to have some improvements on

• Mr. Samson owns a siomai food cart business. He

• Roan has a computer shop. She owns 6 computers.

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