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Credit basics

Credit basics. Advanced Level. Good morning! 4/3/14. Today we are: Learning about credit Notes Worksheet – can they handle credit? Reminder: Credit EverFi module is due by tomorrow Will lose 10%/day it’s late. Your Present Self Impacts Your Future Self.

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Credit basics

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  1. Credit basics Advanced Level

  2. Good morning! 4/3/14 • Today we are: • Learning about credit • Notes • Worksheet – can they handle credit? • Reminder: • Credit EverFi module is due by tomorrow • Will lose 10%/day it’s late

  3. Your Present Self Impacts Your Future Self Credit availability depends on if lenders trust you will pay back the loan as agreed.

  4. Credit Sources • Insurance agents • Pawn shops What credit sources provide the most favorable terms?

  5. When you Borrow You are Spending Future Income Interest is typically paid for the convenience of using credit Toby’s Automobile Loan

  6. Credit can be…

  7. Managing Credit Responsibly Evaluate the Purpose Even if the loan provides long-term benefits, the credit terms should still be favorable

  8. Managing Credit Responsibly Consider Your Options Benefits:

  9. Managing Credit Responsibly Evaluate the contract A contract outlines how and when you will pay the money back

  10. Amount You Borrow Housing payments are not included as a part of the monthly 10% Why should individuals limit their debt?

  11. Closed-End Credit(Installment)

  12. ExampleClosed-end or installment credit Toby applied for a $10,000 automobile loan at 8%. He signs a contract with the lender to pay $313.36 per month for 36 months to repay the loan. Toby could pay more than $313.36 per month to pay off the loan earlier, but he must pay at least $313.36 per month.

  13. Open-End Credit(Revolving) Did Toby have closed-end or open-end credit?

  14. ExampleOpen-end or Revolving credit Whitney charged $200 to her credit card with a 13% interest rate. She receives her credit card bill with a $20 minimum payment. Whitney has many options for paying back the $200 as long as she makes the minimum payment.

  15. Alternative credit

  16. Types of Alternative CreditPayday Loan Short-term loan that provides immediate cash by securing a borrower’s written check or automatic withdrawal form

  17. Alternative Lending Hazard Directions Discussion Questions How much did Mario pay total? If Mario could not pay back the loan until April, what happened with his other car payments? Mario needs $300 to pay his car payment. He uses a payday lender. • After each roll, record: • Number rolled • Payday loan activity • Cost • Calculate the total cost of the loan

  18. Types of Alternative Creditrent-to-Own Borrower leases tangible items with the condition that the item will be owned by the renter if the term of rent is completed What are alternative options?

  19. Types of Alternative CreditTitle and Pawn Loan What are alternative options?

  20. Types of Alternative CreditRefund Anticipation Loan

  21. How to Obtain Credit Exact process depends on the type of credit and lender What type of loans typically advertise no credit check?

  22. Shopping for Credit Shop around with different lenders!

  23. Shopping for CreditEvaluate the contract Carefully!

  24. Evaluate a Contract • Circle items that are potential red flags • Underline the terms of credit • Annual interest rate • Fees • Consequences of late/missed payments • Other things to consider • Is this a contract you would sign?

  25. You are Responsible for your present self and future self! What types of credit will you need in the next five years? Where will you go to get it?

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