1. Going into debt

2.  Credit- The receiving of money either directly or indirectly to buy goods and services today with the promise to pay for them in the future.  Principal- The amount borrowed.  Interest- Amount you pay for the use of some-one else’s money.

3.  Consumer debt almost doubled between 1987-1997.  Installment debt- Pay back with equal payments over a certain period of time.  Used for durables goods, manufactured items that people use for long periods of time.  Mortgage- Installment debt owed on real property. Largest form of installment debt.

4.  1. Immediate need, you can not always put off until later to make a purchase.  2. Spread payments ◦ The longer the loan the less you pay monthly. ◦ The longer the loan the more you pay in interest.

5.  1. do I really need this item?  2. If I pay cash, what will I be giving up that I could buy with this money?  3. If I borrow or use credit, will the satisfaction I get from the item I buy be greater than the interest I pay?  4. Have I done comparison shopping?  5. Can I afford to borrow or use credit now?

6.  1. Commercial Banks  2. Savings and Loan Associations  3. Savings Banks  4. Credit Unions  5. Finance companies and Consumer Finance Companies

7.  1. Regular Charge Accounts, or 30-day charge. Credit limit low, paid off each month.  2. Revolving Charge Accounts, make additional charges even if the amount is not paid off.  3. Installment Charge Accounts, paid through equal payments.

8.  Credit Cards, allow you to make purchases without using cash. Visa and Master card are the two biggest.  Debit Card, make purchases without using cash but the amount is automatically taken out of your account.

9.  Finance charges, Interest plus any other charges connected with credit.  Annual Percentage Rates APR, the cost of credit expressed as a yearly percentage.

10.  Credit Bureau, private business checks your credit.  Credit Check, investigating your credit.  Credit Rating ◦ Past history ◦ Capacity to pay ◦ Character ◦ Collateral

11.  Secured loan, backed with collateral  Unsecured loan, based on reputation and promise to repay  Responsibility as a borrower ◦ Pay on time ◦ Keep records ◦ Notify of loss of card

12.  Truth in Lending Act (1968)- information on costs and conditions of borrowing.  The Equal Credit Opportunity Act (1974)- can not deny credit based on race, religion, national origin, gender, marital status or age.  State Usury Laws- set limits on interest charged.

13.  Congress sets bankruptcy laws  Certain bills still must be paid, taxes  10 years on your record.  2005 amendments make it more difficult to declare bankruptcy.