Jojo is offered an installment loan at a fixed rate for a secured debt. Explain what each aspect of that offer means: Installment –Fixed rate – Secured –
Installment
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Fixed Rate
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Secured
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- An installment loan means that Jojo will receive a set amount of money and will be required to pay it back over a predetermined period of time in equal payments. This is different from a revolving line of credit, such as a credit card, where the borrower has the option to repay the balance in full or make minimum payments each month.
- A fixed rate means that the interest rate on the loan will remain the same throughout the entire term of the loan. This provides Jojo with predictability and stability in terms of how much he will need to repay each month.
- A secured debt means that Jojo will have to provide collateral in order to secure the loan. This collateral can be any asset of value, such as a car or a house, which the lender can seize and sell if Jojo fails to repay the loan. Securing the loan with collateral typically allows Jojo to qualify for a lower interest rate compared to an unsecured loan.