4.1B Intro to Consumer Credit

FICO SCORE: Ranges from 300-850 and summarizes the probability that debtors will repay their debts. 800 is less of a risk to a creditor, near 500 is more at risk. INSTALLMENT PLAN: A method of payment of a purchase or service over a period of time. ASSETS: A person’s property or what is owned FINANCE CHARGE: The interest that is charged when paying for a purchase over time CREDIT: When something is bought that is not paid for at the time of purchase Vocabulary Review

Joe wants to purchase an electric keyboard Joe wants to purchase an electric keyboard. The price of the keyboard at Macelli’s, with tax, is $2,344. He can save $150 per month. How long will it take him to save for the keyboard? Example One

Carpet King is trying to increase sales, and it has instituted a new promotion. All purchases can be paid on the installment plan with no interest, as long as the total is paid in full within six months. There is a $20 minimum monthly payment required. If the Schuster family buys carpeting for $2,134 and makes only the minimum payment for five months, how much will they have to pay in the sixth month? Example Two

Mike has a credit rating of 720. Tyler has a credit rating of 560 Mike has a credit rating of 720. Tyler has a credit rating of 560. Mike and Tyler apply for identical loans from Park Bank. Mike is approved for a loan at 5.2% interest, and Tyler is approved for a loan that charged 3 percentage points higher because of his inferior credit rating. What interest rate is Tyler charged? HINT: use simple interest formula! Example Three

Chris purchases a living room furniture set for $4,345 from Halloran Gallery. She has a one-year, no interest, no money down, deferred payment plan. She does have to make a $15 monthly payment for the first 11 months. What is the sum of these monthly payments? How much must Chris pay in the last month of this plan? Example Four

Austin buys a $3,500 boat on a deferred payment plan Austin buys a $3,500 boat on a deferred payment plan. There is no down payment and no interest for 2 years. Austin makes a minimum payment of $100 per month. To avoid finance charges, he must pay the balance in full before two years has passed. How much should he pay the last month in order to avoid interest charges?  How much has he paid in the first 23 months? How much does he have to pay in the last month to avoid the interest charges? Example Five

Rasheen buys a $4,250 4-wheeler on a deferred payment plan Rasheen buys a $4,250 4-wheeler on a deferred payment plan. There is no down payment and no interest for 3 years. Rasheen makes a minimum payment of $85 per month. To avoid finance charges, he must pay the balance in full before three years has passed. How much should he pay the last month in order to avoid interest charges?  How much has he paid in the first 35 months?   How much does he have to pay in the last month to avoid the interest charges? Example Six

Mrs. Grudman bought a dishwasher at a special sale Mrs. Grudman bought a dishwasher at a special sale. The dishwasher regularly sold for $912.No down payment was required. Mrs. Grudman has to pay $160 for the next six months. What is the average amount she pays in interest each month? Example Seven