1. About Credit
Teachers’ notes:

2. Introduction What Do You Think? When may someone want to have a loan?
Pg 42 Workbook
33%; $230
26%
30%
36%
When may someone want to have a loan?

3. What is Credit? Credit is… Parties involved…
________________________________________________
Parties involved…
Lender: __________________________________________________________________________________________________________________________________
Borrower: __________________________________________________________________________________________________________________________________
How do lenders make money?
Charge interest—represented as Annual Percentage Rate (APR)
Depending on type of credit offered, interest varies
Home mortgage vs credit cards
collateral vs no collateral

4. Types Credit ___________________________
Items and services are paid for in a single payment, within a given time period, after the purchase. Interest is usually not charged.
Utility companies, medical services
Some retail businesses (Countryside Cooperative)
Borrower must repay the amount in a specified number of equal payments
Commercial banks, consumer finance companies, savings and loans, credit unions
Examples: car loans, mortgages, school/education loans
Credit extended in advance so the borrower does not have to apply for credit each time credit is desired
Cannot exceed _____________—maximum dollar amount loaned
Line of credit and interest rate determined by credit worthiness
__________________: borrower’s ability and willingness to pay the money back
Examples: credit cards or department store cards

5. Credit Worthiness – 5 C’s of Credit
What makes an individual credit worthy?
__________________
Person’s honesty and reliability determined by their history of repaying bills on time
Evaluation of a person’s net worth
Income a person has available to repay a loan
Determined by job longevity and having few other loans
Property which can be seized if a person doesn’t repay the loan
General state of the economy

6. What are the Advantages/Disadvantages of Credit
What are the Advantages/Disadvantages of Credit? (discuss w/ 2-3 people)
Advantages:
____________________
Don’t have to carry cash
Creates a record of purchases
________________________________________________________
Make sure paid off w/in time period
______________________
Ensure being able to pay off when it comes due
____________________________
Disadvantages:
___________________________
Higher cost of items
Late payment, annual fees, transaction fees
Increased chance of identity theft
Overspend
More than 20% of take home pay is serious debt (not including mortgage)

7. Is there such a thing as good debt?
____________________________
Bad Debt
____________________________

8. Building a Credit History
Establish a ___________________ record.
Pay all bills __________________.
Open a __________________ and don’t ____________ checks.
Open a __________________ and make ____________ deposits.
Apply for a local store credit card and make __________ monthly payments.
Apply for a small loan using your savings account as __________________.
Get a __________________ on a loan and pay back the loan as agreed.

9. Review What is credit? What are the three types of credit?
What determines credit worthiness?
What is good/bad debt?

10. Assignment Advantages and Disadvantages of Credit Scenario