Date post: | 23-Dec-2015 |
Category: |
Documents |
Upload: | julianna-justina-parrish |
View: | 214 times |
Download: | 0 times |
CREDITPART 1
Mr. Stasa – Willoughby-Eastlake City Schools ©
https://www.youtube.com/watch?v=xdflQV9QKXQ
Credit Card facts…
Americans currently owe over 1 trillion dollars in credit card debt
At least 7 million Americans owe more than $25,000 on just credit cards alone
Americans are charged more than $116,000,000,000 each year in just interest alone
Americans are charged more than 23 billion in late fees each year.
https://www.youtube.com/watch?v=i5pXFvOAu5I
What Would You Do? What would you do if a student, who
you didn’t know, approached you at lunch to borrow $5 and promised to pay you back the next day?
Would you instantly let that student borrow your $5?
What question(s) would you have for this student?
What could you do to determine if this student is a reliable borrower?
Terminology Credit is money loaned to you by a
creditor that must be paid back.
A Creditor (or lender) is someone who must be repaid for having lent money.
Examples of creditors
Credit card companies Banks Department stores Gas stations Cash-advance stores
What should a creditor should do if…
You take out a loan to buy a car, but never make payments on the loan?
You take out a loan to go to college, but you never make payments on the loan?
You buy clothes on your store credit card but never make payments on the card?
REPOSSESS
GARNISH WAGES SUE
What if you miss payments?
1. Begin receiving overdue notices in mail
2. Receive phone calls from card company or collection agency
3. Card company reports you to credit bureaus
4. Late fees will begin with interest rates increasing
5. Legal action will be taken (garnish wages, court action)
Types of Loans An unsecured loan is when the
lender agrees to provide a loan that is not tied to any collateral.
If the borrower is unable to re-pay the loan, the lender does not have the ability to take possession of personal property.
Interest rates are typically higher
Examples are: Personal loans Student loans
Types of Loans A secured loan is when the lender
agrees to provide the loan that is tied to collateral.
If the borrower is unable to repay the loan, the lender can repossess personal property that is tied to that loan.
Example: If someone purchases a house using a mortgage, the bank can repossess the house if the borrower can’t make payments. Examples:
House Car
Did you know…
There are companies that keep track of whether or not your pay your bills and if you make your payments on time?
Making irresponsible choices can stay on your record (credit history) for 7 years or more
https://www.youtube.com/watch?v=N0zS0gJiOfI
Three Types of Credit
1.Installment Credit2.Revolving Credit3.Open Credit
Installment Credit
Installment credit are loans that must be repaid with fixed monthly payments. Late fees and interest increases can result with missed payments.
Examples include: Car loans Mortgage Student loans Personal loan
Revolving Credit
Revolving credit allows you to pay your balance in full each month but are required to make at least the minimum payment.
Examples include: Credit cards Store credit cards
When Making Payments You Can…
Minimum Payment is the smallest amount that can be paid every month
1. Pay total amount owed OR
2. Make smaller
payments (minimum payment)
Minimum Payment SampleYou receive your credit card bill:• Total amount owed is $2,720.12• The interest rate on your card is 15.24% • The minimum payment is $54.00
Open Credit
Open credit requires you to pay your balance in full each month for services used. Failure to make full payment can result in immediate termination of services.
Examples include: Cell phones Utilities Rent Car lease
Guess which is which!!
Which are OPEN, REVOLVING, or INSTALLMENT?
Cell Phone Student Loans
Rent
Credit Card Water Bill Mortgage
Car Loan Car Lease Store Credit Card
What’s a Credit Score?
A credit score is a three-digit number that predicts a person’s financial risk
Scores range from 300 – 850 points
The higher the number, the lower the risk you are
Credit Score Description
850 - 760
Excellent score. The lender will offer you their best interest rate.
759 - 700
Great score. There won't be any trouble in getting a loan at good interest rate.
699 - 660
Good score. There won't be any problem in getting a loan at good interest rate.
659 - 620
Fair score. You may qualify for the loan but not at good interest rates.
619 - 580
Poor score. You may qualify but the interest rates will be very high.
579 - 300
Very poor score. It's doubtful that you may qualify for the loan, and if you qualify, the interest rates will be extremely high.
http://www.youtube.com/watch?v=gkpqzyZMg4o
Credit Score Impact
EXAMPLE: $15,000 LOAN (3 YEAR FIXED AUTOMOBILE)
FICO Score
Interest Rate
Monthly Payment
3 Year Amount
$2,124 can be saved over the lifetime of this loan because of a good credit score!
Credit score determines the interest rates for loans
730 6.16% $457 $16,452
660 8.77% $475 $17,100
590 14.43%
$516 $18,576
Where Does America Fall?
http://www.youtube.com/watch?v=CHaqAF5PEVM&feature=related
What’s a Credit Score Made of?
There are five major categories that make up a credit score:1. Payment history2. Amounts owed3. Length of credit history4. New credit5. Types of credit used
http://www.youtube.com/watch?v=lx4SXQeO6Iw
The 4 C’s of Credit Collateral
What do you have of value that a lender can take if you do not repay the loan as promised?
Capacity Do you have the financial ability to
repay a loan with your current income?
Lenders look at income and employment history.
Capital Is the lender fully protected if you
cannot repay the loan? Character
Are you responsible? Do you have good credit history of paying your bills on time?
http://www.youtube.com/watch?v=5QEBXr7GzF4