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credit

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

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credit

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  1. credit Chapter 25

  2. 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

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

  4. 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

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

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

  7. 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!!!!!

  8. 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?

  9. 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

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

  11. 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

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

  13. 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…

  14. 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

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