get a textbook get a notes sheet start filling in the vocabulary (top section) tuesday
TRANSCRIPT
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GET A TEXTBOOK
GET A NOTES SHEET
START FILLING IN THE VOCABULARY (TOP SECTION)
Tuesday
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SOURCES OF LOANS AND CREDIT
Chapter 4-Section 2
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Types of Financial Institutions
1. Commercial Banks Bank who’s main function is to accept deposits, lend funds, and transfer funds among banks, individuals, and businesses.
**Largest amount of funds**
Functions: Checking, Savings, Loans for individuals, businesses and between banks.
Examples: Any bank we are familiar with:Bank of the WestWells Fargo, Union Bank, First Bank, Etc.
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2. Savings and Loan Association
Depository institution that accepts deposits and lends funds.
Functions:Personal MortgagesCommercial MortgagesAuto Loans
Examples:
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3. Savings Banks
Depository institutions originally set up to serve small savers overlooked by commercial banks.
Functions:Similar to S & LMortgagesPersonal & auto loansChecking
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4. Credit Unions
Depository institution owned and operated by its members to provide savings accounts and low-interest loans only to their members.
Functions:Lower interest loansHigher interest on savings
Examples:NE Educators C.U.; NE Energy Fed’l C.U.; Other companies that have C.U.’s: Goodyear, State Farm, etc.
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5. Finance Company
Company that takes over contracts for installment debts from stores and adds a fee for collecting the debt.
Consumer Finance Company--makes loans directly to consumers at relatively high interest rates.
Examples:Payday Advance companies
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Paycheck Advance Companies
How do they make sure the borrow will repay their loan? Take care titles as security
What do you think would happen if the borrow didn’t repay their loan? Loan company would take possession of the car
Sometimes charge 30%Can spiral a persons financial situation until
you’d possibly be paying a whole paycheck in fees.
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Charge Accounts- 3 Options
Charge Accounts – credit extended to a consumer from a particular store.1. Regular charge account – pay in full after 30 days
No interest if paid in 30 days
2. Revolving charge account – Can make more charges even if you haven’t paid in full.
Interest charged on unpaid balance
3. Installment charge account – equal payments spread over time.
Examples: major items—sofas, televisions, refrigerators
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What you need to Know!
What does this mean?
What about interest?
OTHER CHARGE OPTIONS
“90 Days same as Cash”
You have 90 days to pay without store charging interest
IF you are a DAY late, you pay all the BACK INTEREST!!!
Higher interest rate than usual
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Credit Cards vs. Debit Cards
Like charge accountsCan be used at most
stores in U.S. and even foreign countries Examples: Visa,
MastercardCan borrow cash (like
access to a loan)Must provide a
signature
Electronic transactions from your bank account
Need a PIN instead of signature
Do NOT provide loans or credit!
Compare & Contrast
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Finance Charges & Annual Percentage Rate(The cost of credit)
Finance charge – cost of credit expressed monthly in dollars and cents Interest costs plus any other charges connected with credit are
taken into account.
Computed in 4 Different Ways:1. Previous Balance2. Adjusted Balance3. Average daily Balance4. Past due Balance
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Annual Percentage Rate (APR)
Cost of credit express as a yearly percentage.
What does that mean?
A company that charges 18% APR would charge you $18 ANNUALLY for every $100 unpaid throughout the year
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Stores have to pay a percentage of credit purchases to the company that issued the card.
Did you know?
Why would they accept credit cards?
How does this charge get passed on to consumers?
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APPLYING FOR CREDIT
Section 3
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What would you do?
What factors in to
your decision?
How long would you give them to pay it back?
A friend wants to borrow money from you. Would you lend it to him or her?
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Some Vocabulary
Credit Bureau – private business that investigates a person to determine the risk involved in lending to that person.
Credit Check – Investigation of a person’s income, current debts, personal life, and past history of borrowing and repaying debts.
Credit rating – rating of the risk involved in lending to a person or business
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Three C’s of Creditworthiness
Capacity to Pay ~ How much debt do you have in relation to your income.
Character ~ financial reputation as a reliable and trustworthy person.
Collateral ~ something of value that a borrower lets the lender claim if a loan is not repaid.
Cosigner (if needed) ~person who signs the loan with you and promises to repay if you do not.
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Friday
Bell ringer #2Chapter 4 Section 3 NotesCredit Card Comparison
If needed, time to finish glue activity from yesterday
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Bell Ringer
Name 3 of the 5 C’s of CreditGive an example of each
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Will you be able to get credit?
Several factors determine a person’s creditworthiness. When applying for credit:– You will be asked to fill out a credit application.
– The lender will hire a credit bureau to do a credit check.
– The credit bureau will provide the creditor with a credit rating for you.
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What factors might negatively affect your credit score?
Higher the score, the less risk the person represents
Higher scores get better interest rates
AnnualCreditReport.com
Can get a free credit report every 12 months from:
• Equifax• TransUnion• Experian
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What hurts your credit rating?Late payments
High debt-to-income ratio
Having many open accounts
Previous bankruptcy
Unemployment
Legal trouble
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Secured Loan Unsecured Loan
Backed up with collateral.
Can be the item being purchased (house, car, etc.)
Guaranteed only by a promise to repay it.
Not back with Collateral.
Interest rate is usually higher
Types of Loans
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Responsibilities of a Borrower
Paying your debts on time
Keeping a complete record of all the charges you have made
Notifying the issuer if your card has been lost or stolen
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GET BOOKS AND NOTES OUTBELL RINGER TIME – FILL IN TWO
VOCABULARY WORDS ON NOTES CH. 4-SECTION 4
TODAY:BELL RINGER, SECTION 4 NOTES
FINISH GUIDED READING 4-3 & 4-4 – HAND IN
REMINDERS:TEST THURSDAY
ALL “LATE” WORK DUE THURSDAY TOO!
Monday
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GOVERNMENT REGULATION
OF CREDIT
Section 4
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Government Regulations of Credit ~Laws Protecting Borrowers
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Laws Continued…
2. Equal Credit Opportunity Act
prohibits providers from denying credit based on race, religion, national origin, gender, marital
status, or age.
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Laws Cont…
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Personal Bankruptcy
Bankruptcy—the state of legally having been declared unable to pay off debts owed with available income.
Used only as last resort!When bankruptcy is approved through bankruptcy
court, debtors must give up most of what they own, which is then distributed to the creditors.– By law, certain debts, such as taxes, must
continue to be paid.
– Bankruptcy proceedings remain on your credit record for 10 years.
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