5A Consumer Credit #1. Credit – An arrangement to receive cash, goods, or services now and pay for them in the future. Types of credit ???. Objective 1 Analyze Advantages and Disadvantages of Using Consumer Credit. Credit
Credit– An arrangement to receive cash, goods, or services now and pay for them in the future.
Types of credit ???
Before you use credit for a major purchase, ask:
Two Basic Types of Consumer Credit
Examples of each?
Before you take out a loan, ask yourself...
Can you meet all your essential expenses and still afford the monthly loan payments?
Debt Payments-to-Income Ratio
Monthly Debt Payments*
Net Monthly Income
Consumer credit payments should not exceed a maximum of 20% of your net income.
*Not including a house payment, which is a long-term liability
Debt To Equity Ratio
Should be < 1
*Excluding home value
The lower the ratio, the better; e.g., 0.5 or 0.25
ECOA (Equal Credit Opportunity Act)