1. Types of Credit

2. Focus Questions What types of credit are available?
How does a revolving credit account work?
What are some good sources of loans?

3. Short term consumer credit
Usually refers to debts that are paid within one year

4. Service Credit The service is provided before you pay for it. Examples
Utilities, Cable TV, Water, Garbage Collection

5. Installment Credit
Repaid in equal amounts over a set period of time Usually a down payment is required A finance charge is added to the amount owed, and the total is divided by the number of months that payments will be made. Example iphone 6 with AT&T

6. Credit Cards
Plastic cards issued by banks, retail stores, and other businesses that allow the user to buy products or services on credit, with an interest charge if the balance is not paid in full by the due date

7. Credit Card Rates
Annual Percentage Rate (APR) the amount of interest expressed as a yearly rate

8. Credit cards are a form of revolving debt.
You do not have to pay in full each month as long as you make the minimum payment.
You are charged interest on the unpaid balance.

9. Charge Cards
Similar to credit cards but the full balance must be paid each month
No interest charges
Usually there is an annual fee
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10. Safeguarding Your Cards
Sign your cards
Carry only one or two cards
Keep your eye on your card during transactions and get it back as soon as you can
Don’t loan out your card
Cut up expired and or cancelled cards
Don’t give out your card number to unfamiliar people and businesses
Keep your sales receipts and check them against transactions on your statement

11. Debit Cards
They are a substitute for writing checks The amount of the purchase is immediately deducted from your checking account

12. Prepaid Card Similar to a prepaid credit card
You load money onto the card and your limit will be the amount of your account
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13. Gift Cards Also prepaid

14. Loans
Loans can be secured or unsecured. Loans can be short (less than one year) or long term. Term of a loan refers to the amount of time you have to repay it.

15. Types of Loans
Secured loans are backed by collateral (an asset like a car or a house) Unsecured loans are not backed up by collateral.

16. Personal Loans
Usually unsecured For personal use Cost for a personal loan is usually cheaper than installment credit

17. Auto Loans
Secured loan Available through banks, credit unions, S&Ls, dealerships, and finance companies

18. Student Loans
Made to help out with education beyond high school Available through banks, Federal government, etc. Unsecured Cannot get rid of this debt through bankruptcy

19. Home Loans
Loan is secured by your house Down payment required General rule: monthly mortgage payment should not be more than 25% of your income (net?)

20. Home Equity Loan
House serves as collateral May be able to borrow up to the amount of equity in the home Fixed rate of interest and a fixed term

21. Home Equity line of credit
A line of credit is a preapproved loan amount that you can use anytime you want, for any purpose The bank charges interest only on the amount you use Your monthly payments would be whatever you wanted to pay, as long as you meet the minimum

22. Consolidation Loan
Combining all the existing loans into a single new loan Provide the simplicity of a single loan

23. Sources of Loans
Banks
Credit Unions
S&Ls
Consumer Finance Companies

24. Banks
Typically low rate
Need a good credit score
Require collateral

25. Credit Unions To borrow money, you need to be a member
Usually easier to get a loan
Interest rate is usually low

26. S&Ls Original purpose was to provide money for home loans
You can obtain loans for other purposes as well

27. Consumer Finance Companies
Make loans to people who might have a hard time obtaining a bank loan
Charge a higher interest rate
Operate under state law
Maximum amount they can loan varies from state to state

28. Loans to Avoid Credit Card Cash Advance Payday Loans
Tax refund anticipation loans
Pawnshops
Loan Sharks

29. Credit Card Cash Advances
The bank charges a fee for the transaction
The interest rate will be higher than the rate on purchases
There is no grace period, interest charges begin as soon as you take the advance
Payments you make to your credit card are applied first to purchases

30. Payday Loans Small, short term, high interest loans
APRs of over 400% are not uncommon

31. Refund Anticipation Loans
You borrow an amount equal to your tax refund
Various fees
High interest on the loan

32. Pawnshops Leave something of value as collateral
If you don't repay the loan by the due date, item is sold
Numerous fees
Interest rates are very high

33. Loan Sharks
People who loan money illegally and set very high interest rates