Introduction to Business and Marketing

OBJECTIVES  Identify the sources of credit  Understand the types of credit

THE MAIN IDEA  There are many different types of credit plans including  charge accounts  credit cards  single payment loans  installment loans  mortgage loans

Length of Loans One year or less Short-term Loan 1-5 years Medium-term Loan More than 5 years Long-term Loan

Sources of Credit Charge Accounts Credit Cards Banks and other Financial Institutions Seller Provided Credit Consumer Finance Companies

Charge Accounts  Credit provided by a store or company for customers to buy its products  Can usually only be used at that store

Credit Cards  Credit cards are like charge accounts, but some can be used in many different places.  Some credit cards have annual fees, which can range from $  Credit card companies earn money from the interest they charge and annual fees

Types of Credit Cards  Single Purpose Cards - can be used to buy goods or services only at the business that issued the card  Multipurpose Cards - also called bank credit cards because banks issue them  Can be used at many different businesses  Travel and Entertainment Cards – holders must pay the full amount due each month and pay an annual fee

Banks and Other Financial Institutions  Want to lend money to people with good credit ratings  Credit unions only lend money to credit union members and employees

Single-Payment Loan  A debtor pays back a single- payment loan in one payment, including interest  Many farmers secure single- payment loans in the spring and pay back in fall

Installment Loan  Loans repaid in regular payments over a period of time  Examples  Student loans  Car loans  Home improvement loans

Mortgage Loan  Installment loan that lasts a long time  Usually years  Used to purchase real estate (home)  Home serves as collateral

Seller-Provided Credit  Many stores provide credit for their customers  Clothing, furniture, and appliance stores as well as car dealerships are among those that offer credit to customers.

Consumer Finance Companies  Specialize in loans to people who might not be able to get credit elsewhere  These loans are more expensive because the risk for the lender is high

Other Types of Loans  Payday advance services offer short-term loans until payday  Payday advance services charge high fees and interest

Other Types of Loans  A pawnshop loan is based on the value of something you own that is left with a pawnbroker as security against money borrowed  Items can be bought back later

Think about it!  Think about the following questions and discuss them with your pod.  Formulate an answer and be prepared to share your answer with the class.

Question 1  Do you think people who are responsible and pay all their debts on time should have the same interest rate as people who are delinquent on payments?  Why or why not

Question 2  Do you think it is fair for payday loans and car title loans to have higher interest rates than regular bank loans?  Why or why not

Activity  Complete the chapter 25 Review and Activities  Review Key Concepts 1-5  Critical Thinking 6-13  Be prepared to share answers with the class