MR. Kiser – Financial Literacy

 Default – This happens when a borrower fails to pay the debt owed  Credit – Allows you to buy goods or services now to pay for them later  Credit Score – Numerical measure of a person’s creditworthiness that takes into account bill paying, and credit history length  Collateral – Property a borrower promises to give up if they cannot pay their debts  Principal – The actual amount of money borrowed  Contract – Legally binding agreement between two parties  Secured Loan - A loan that requires collateral

 Bankruptcy – Legal state in which the courts excuse a debtor from repaying some or all debt after the debtor gives up certain assets and possessions  Foreclosure – Forced sale of property  Lien – Legal claim on a borrower’s property by a creditor who is owed money  Garnishment – Legal procedure requiring a portion of the debtors’ pay to be set aside by the person’s employer to pay creditors  Repossession - Taking back of collateral when a borrower fails to repay a loan

 Is Credit an important part of our economy?  Yes and it’s convenient  Credit involves an agreement between who?  A creditor and a borrower  Who are the creditors?  People who supply money, goods, or services and are paid on an agreed upon schedule  What are advantages of credit?  You can use goods and services as you pay for them  You have the ability to make purchases that are part of a long-term plan like a home  You have the ability to make purchases online

 What are drawbacks of using credit?  You must manage the temptation to spend more than you can pay off  You must pay interest on all purchases made with a credit card  Risk of serious consequences if debts are not paid off  Who takes on the risk that the borrower cannot pay what is owed?  The Creditor does  What must borrowers pay in order to use credit?  Finance charges  How would you describe someone who is credit worthy?  Someone who has assets, income, and tendency to repay their debts

 What are some good ways to establish credit?  Asking your parents to put a utility bill in your name  Apply for a credit card and pay off some small purchases  Get a job  How is a person’s credit worthiness measured?  By the credit score  What is open ended credit and what is an example?  Credit that does not have an end date or payoff date, like a credit card  Subprime credit cards have high interest rates and low limits. Who are they available for?  Consumers who have poor credit histories

 What is the range of credit scores?   What is a person’s credit report?  A record of a person’s credit history, including any late payments, unpaid debts or bankruptcy  What is the grace period in a credit card agreement?  the time between the billing date and the start of interest charges  Borrowing money from a friend is a solid alternative to using credit.  False  Loan Sharks, Pawn Shops, and Payday Loans are credit traps that should be avoided.  True

 When having problems paying debt/bills, you should notify creditors and ask them to work with you so you can handle paying your debt.  True  Steve asked his parents to pay his own cell phone bill so that he could prove he could pay a bill every month. This will improve Steve’s:  Character  Steve decided to put more money from each paycheck toward his savings to build up his balance. This will improve Steve’s:  Capital  Steve got himself a better part-time job- it has more hours available and pays more. This will improve Steve’s:  Capacity

 The principal of Ross’s loan is what?  $6000  Ross’s annual percentage interest rate is what?  6.2%  This an example of what kind of credit?  Closed end credit  The terms of Ross’s agreement with the bank who gave him the loan would be written up in what?  Contract  What would Ross’s father be in the contract?  Cosigner

 If neither Ross nor his father can repay the loan, they will have ___ on the loan.  Defaulted  What could the bank use as collateral?  The car