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**GR 12 Term 2 FINANCES: BANKING - Coggle Diagram

- - - - Funeral cover plans provides funds in case of death
    - - A way to provide for your children's future. Decide what you can afford and pay it into a policy designed by insurance companies.
    - - An investment where you pay a monthly fixed amount for a certain period of time, to raise money for your retirement. It can ensure that you have an income when you can no longer work. The earlier you start an annuity account the easier it is to provide for your retirement. You earn interest on your interest added every month. Your capital increases further because you also pay a monthly premium into the annuity account every month.
    - - A "typical South African savings plan" which was started by a community. Each member pays a fixed amount into a central fund, informally or in a formal bank account. There are insurance companies that have developed stokvel investment plans to enable members of a stokvel to buy homes.
    - - Aim: Save monthly amounts to generate funds for a deposit on a house or to travel.
    - - **Interest rates fluctuate. The borrower can request a fixed interest rate on the monthly investment. Should the interest rates increase then the borrower's interest rate does not increase. The borrower forfeits increased growth. Should interest rates fall, the borrower wins with the fixed interest rate. ascend.
        Interest rates are linked to the term length of the contract and the size of the monthly deposit.**
    - - Cost is minimal
    - - **Pay monthly installments over a set time
    - - Designed to generate big amounts of capital by depositing a fixed amount monthly
    - - Compound interest is calculated on the balance at the end of each month**
        At the beginning of each month, the capital increases with the monthly deposit amount.
  - - - Low risk investment. No accessibility to funds
    - - Terms of a fixed investment vary from as short as 3 months to 10 years or longer
    - - Investment account fees are minimal. Penalty payments may apply should you wish to withdraw some or all of your money before the end of the investment term
    - - Stacked interest rates are usually high and linked to the size of the amount and the investment term.
        Interest is usually compounded monthly.
- - - - The future value of the hire-purchase is determined by first determining the total simple interest for the term of the loan and adding it to the loan amount. The monthly instalment amount is used to
        
        repay the total amount/future value.
        
        pay any costs if applicable
    - - Monthly installment is used to
        
        repay the loan amount
        
        pay the monthly interest added
        
        pay the monthly costs if applicable
    - - Monthly instalment is used to
        
        To repay the loan amount
        
        To pay the monthly interest
        
        Pay the monthly costs where applicable
    - - Ordinary Car Monthly instalments instalment is used to
        
        repay the loan amount
        
        pay monthly interest added
        
        pay monthly costs if applicable
      - Car loan with residual value/balloon instalment
        The original loan amount is divided into two:
        
        A smaller loan amount
        
        A residual amount or a final balloon instalment that is up to 30% of the original loan amount.
        
        The monthly repayment instalment is used to
        
        repay the loan amount
        
        pay the monthly interest
        
        pay the monthly costs if applicable
        
        pay the monthly interest on the residual value or balloon instalment.**
    - - The loan term varies.
        
        Home loans up to 30 years
        
        Car loans up to 7 years
        
        The longer the term, the lower the monthly payment but the total interest paid is usually much more..
    - - Mandatory costs
        
        Initial costs (maximum, 25% of the loan amount). These costs can be paid in cash or added to the loan amount.
        
        Monthly Admin costs(maximum R50)
        
        Sometimes a deposit amount is required. The deposit is a % of the selling price and reduces that actual loan amount.
      - Optional Costs
        
        Insurance can be taken out :
        
        so that the loan amount can then be repaid in case of disability or death.
        
        to pay the monthly instalments up to one year in case of illness, job loss, etc.
    - - Hire Purchases, Home and Car Loans
        The loan/financing amount is paid to the provider
      - Personal and microloans :
        The loan/financing amount is paid into the borrower's bank account
    - - Interest rates vary,
        May change during the term of
        down payment which means the monthly installments can increase or decrease
        *
    - - Hire purchase
        
        Simple interest is calculated per year on the loan amount.
        
        This total interest amount is added to the loan amount and gives the future amount
        
        The future amount is divided by the number of months to determine the monthly instalment.
      - The Monthly installments include:
        
        An amount used to repay the loan amount.
        
        The interest compounded either monthly or simple interest on the loan amount
        
        The monthly administration costs.
        
        Any optional expenses are determined in advance.
      - the monthly installments of all the other loans discussed are determined as follows
        
        A factor table is used to determine the repayment amount per R1000
        
        The monthly installment to pay off interest and capital
        = factor table amount x loan amount / 1000
        3.The total monthly installment = the above amount plus costs
        Please note there are several mobile or computer apps that you can download that can be used to work out the monthly repayments installment.