1. Credit and Debt
Chapter 11

2. Understanding Credit
What if you really want or need something, but don’t have the cash for it?
Credit is a loan
Open-Ended Credit: can be increased by the debtor by continuing to purchase things (up to a certain limit)
Ex: Credit Card- Visa, Macy’s, Target
Closed-Ended Credit: Given for a specific amount, cannot be increased with additional purchases. Pay back in monthly installments
Ex: Loan for a vehicle

3. How to get Credit Fill out an application Credit history Your income
Your assets
Lenders want to know if you are a credit risk

4. How to get Credit cont…
Secured Transactions- backed up by property (collateral) that the creditor can take
The creditor gains security interest when the debtor defaults
Unsecured Loans- higher interest; offered only to well- established business owners or customers
Secured party = lender holding security interest

5. How to get Credit cont… Attachment of Security Interest
When legally enforceable by the secured party
Debtor owns collateral
Secured party transfers something of value (money, goods)
Secured party either takes possession of the collateral

6. Guarantors
A loan can be protected by having another party stand behind the loan to guarantee it will be repaid. Guarantor: A second party