Credit Chapter 25.

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Presentation transcript:

credit Chapter 25

Credit Objectives: Define credit and indicate three factors that affect the interest Name different groups in our economy that use credit Identify three advantages and disadvantages of using credit Name places where you can get credit and list the three different types of credit cards

What is credit? A promise Buy now—pay later. A contract between Vocabulary: Credit, Creditor, Debtor,

Credit Serves four (4) functions in our economy Stabilizes the economy allowing for purchases (Buy now and pay later) Promotes Business Growth – allows for new businesses to form Expands Production – business can purchase new capital Raises the standard of living – as a consumer you have more assets because of credit

IMPORTANCE OF CREDIT (Why do you need credit?) Car loan, mortgage, student loan etc. Utilities Insurance Renting

PROS and CONS Advantages Convenient Establishes credit history Emergencies Risks with carrying cash Purchasing online Helps economy grow

DISADVANTAGES Costs are attached to using credit Misuse – many people are not disciplined when using credit May lead to a Lower credit rating if you can not stop spending Credit Fraud TOO MUCH DEBT!!!!!

Factors to Consider Before Using Credit Is a Down Payment required? Can I use Savings? Can I really afford it? Use credit now? Or Wait to buy later What are the Costs involved?

Sources of Credit Credit Cards Single-Purpose Cards (Revolving) Examples: Multipurpose Cards (Revolving) Examples Travel and Entertainment (Regular) Revolving Unsecured – not guaranteed by other property or cash Higher Rates Secured – where property or cash is pledged for an asset Collateral

Banks offer Credit Single-Payment Loan (seasonal businesses) Installment Loan – When would I use… Mortgage Loan Purchase a Home

Other Sources of Credit Seller-Provided Credit Buying Furniture Examples: Consumer Finance Companies For People who have _______ Payday Advance Services Used to cash checks & get loans Pawnshops

Chapter 26 – How to Get and Keep Credit What I need to know…

Developing a Credit History Without a History Banks will not loan you money and/or You will pay very high interest rates Ways to begin developing a Credit History Open a Checking and Savings Account Get a Debit Card Apply for a Secured Credit Card Charge Small balances and pay bill in full each month NOTE: IF YOU HANDLE THE ABOUT RESPONSIBLY THEN…

Developing a Credit History You will have a good chance of getting a car loan, mortgage or a personal loan BEFORE APPLYING FOR A LOAN Check your Credit Report – fix discrepancies Bring the following when applying for a loan: PROOF OF INCOME: Pay stubs, tax reports, bank statements, or any other proof of income PROOF OF IDENTITY: Social Security Number and Driver’s License If they feel you are not credit worthy you may need a Cosigner