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CREDIT Chapter 25 1

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Page 1: CREDIT Chapter 25 1. Credit Objectives: Define credit and indicate three factors that affect the interest Name different groups in our economy that

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CREDITChapter 25

Page 2: CREDIT Chapter 25 1. Credit Objectives: Define credit and indicate three factors that affect the interest Name different groups in our economy that

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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

Page 3: CREDIT Chapter 25 1. Credit Objectives: Define credit and indicate three factors that affect the interest Name different groups in our economy that

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What is credit?

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

Page 4: CREDIT Chapter 25 1. Credit Objectives: Define credit and indicate three factors that affect the interest Name different groups in our economy that

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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

Page 5: CREDIT Chapter 25 1. Credit Objectives: Define credit and indicate three factors that affect the interest Name different groups in our economy that

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IMPORTANCE OF CREDIT (Why do you need credit?)

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

Page 6: CREDIT Chapter 25 1. Credit Objectives: Define credit and indicate three factors that affect the interest Name different groups in our economy that

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PROS and CONS

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

Page 7: CREDIT Chapter 25 1. Credit Objectives: Define credit and indicate three factors that affect the interest Name different groups in our economy that

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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!!!!!

Page 8: CREDIT Chapter 25 1. Credit Objectives: Define credit and indicate three factors that affect the interest Name different groups in our economy that

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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?

Page 9: CREDIT Chapter 25 1. Credit Objectives: Define credit and indicate three factors that affect the interest Name different groups in our economy that

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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

Page 10: CREDIT Chapter 25 1. Credit Objectives: Define credit and indicate three factors that affect the interest Name different groups in our economy that

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Banks offer Credit

Single-Payment Loan (seasonal businesses)

Installment Loan – When would I use…

Mortgage Loan Purchase a Home

Page 11: CREDIT Chapter 25 1. Credit Objectives: Define credit and indicate three factors that affect the interest Name different groups in our economy that

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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

Page 12: CREDIT Chapter 25 1. Credit Objectives: Define credit and indicate three factors that affect the interest Name different groups in our economy that

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Page 13: CREDIT Chapter 25 1. Credit Objectives: Define credit and indicate three factors that affect the interest Name different groups in our economy that

CHAPTER 26 –HOW TO GET AND KEEP CREDIT

What I need to know…

Page 14: CREDIT Chapter 25 1. Credit Objectives: Define credit and indicate three factors that affect the interest Name different groups in our economy that

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…

Page 15: CREDIT Chapter 25 1. Credit Objectives: Define credit and indicate three factors that affect the interest Name different groups in our economy that

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


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