credit chapter 25 1. credit objectives: define credit and indicate three factors that affect the...

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CREDITChapter 25

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Credit Objectives:

Define credit and indicate three factors that affect the interest

Name different groups in our economy that use credit

Identify three advantages and disadvantages of using credit

Name places where you can get credit and list the three different types of credit cards

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What is credit?

A promise Buy now—pay later. A contract betweenVocabulary: Credit, Creditor, Debtor,

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Credit Serves four (4) functions in our economy

1. Stabilizes the economy allowing for purchases (Buy now and pay later)

2. Promotes Business Growth – allows for new businesses to form

3. Expands Production – business can purchase new capital

4. Raises the standard of living – as a consumer you have more assets because of credit

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IMPORTANCE OF CREDIT (Why do you need credit?)

Car loan, mortgage, student loan etc. Utilities Insurance Renting

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PROS and CONS

Advantages Convenient Establishes credit history Emergencies Risks with carrying cash Purchasing online Helps economy grow

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DISADVANTAGES

Costs are attached to using credit Misuse – many people are not disciplined

when using credit May lead to a Lower credit rating if you

can not stop spending Credit Fraud TOO MUCH DEBT!!!!!

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Factors to Consider Before Using Credit

Is a Down Payment required? Can I use Savings? Can I really afford it? Use credit now? Or Wait to buy later What are the Costs involved?

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Sources of Credit

Credit Cards Single-Purpose Cards (Revolving)

Examples: Multipurpose Cards (Revolving)

Examples Travel and Entertainment (Regular) Revolving

Unsecured – not guaranteed by other property or cash Higher Rates

Secured – where property or cash is pledged for an asset

Collateral

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Banks offer Credit

Single-Payment Loan (seasonal businesses)

Installment Loan – When would I use…

Mortgage Loan Purchase a Home

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Other Sources of Credit

Seller-Provided Credit Buying Furniture Examples:

Consumer Finance Companies For People who have _______

Payday Advance Services Used to cash checks & get loans

Pawnshops

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CHAPTER 26 –HOW TO GET AND KEEP CREDIT

What I need to know…

Developing a Credit History

Without a History Banks will not loan you money and/or You will pay very high interest rates

Ways to begin developing a Credit History Open a Checking and Savings Account Get a Debit Card Apply for a Secured Credit Card

Charge Small balances and pay bill in full each month

NOTE: IF YOU HANDLE THE ABOUT RESPONSIBLY THEN…

Developing a Credit History

You will have a good chance of getting a car loan, mortgage or a personal loan

BEFORE APPLYING FOR A LOAN Check your Credit Report – fix discrepancies Bring the following when applying for a loan:

PROOF OF INCOME: Pay stubs, tax reports, bank statements, or any other proof of income

PROOF OF IDENTITY: Social Security Number and Driver’s License

If they feel you are not credit worthy you may need a Cosigner