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Ch. 11

Ch. 11. Credit and Debit. If a friend asks you to borrow money what are some of the questions you are going to ask?. Terms to Know. Credit - buy now, pay later Creditor - party lending the money Debtor - Party buying the goods/services (borrrowing the money)

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Ch. 11

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  1. Ch. 11 Credit and Debit

  2. If a friend asks you to borrow money what are some of the questions you are going to ask?

  3. Terms to Know • Credit - buy now, pay later • Creditor - party lending the money • Debtor - Party buying the goods/services (borrrowing the money) • Interest - fee creditors charge for lending money

  4. Open-End Credit Creditor give you a maximum amount of money Ex: Credit Cards Closed-End Credit Credit given for a specific amount of money Ex: buying a car Types of Credit

  5. Credit • How do you obtain credit? • What do they look at? • What is the difference between credit cards and debit cards? • How does repayment work? • What if you don’t repay?

  6. Secured Transactions • Secured Loan - Loan backed up with collateral that the credit can take if not paid. • Collateral - property offered as a security interest • Security Interest - creditor’s right to use collateral to recover debt • Secured Party - Person holding security interest • Default - not repaying the loan

  7. Unsecured Loan • Doesn’t require collateral • Interest is usually higher than a secured loan

  8. Buying a Car - Financing • Regulation Z of the Truth in Lending Act specifies lenders must disclose 2 things: • APR - true interest rate of the loan • Finance Charge - cost of loan in $ and cents

  9. Things to know before you finance: ｷExact price of vehicle ｷAmount you are financing ｷFinance charge ｷAPR ｷNumber and amount of payments ｷTotal sales price

  10. Defective Vehicles • Seller can be held liable if: • Breach of express warranty, they made a promise to do something and they didn’t do it. Example: they are going to fix the alignment before you buy it and they don’t • Breach of warranty of merchantability, seller was a dealer and the car was not fit to be driven.

  11. Defective Vehicle • Seller can be held liable if: • Fraud or breach of express warranty, seller made statements about the car that weren’t true Example: seller said the car had new brakes when the brakes aren’t new • Breach of the state consumer protection law, only if vehicle is for personal use.

  12. Lemon Law • To be considered defective in many states it must be: • Substantially defective • At the dealer 3 time for repairs • No older than 1 year • Not exceed 15,000 miles

  13. Motor Vehicle and Cost Savings Act • Bumper Standards • Average Fuel economy standards • Produce cars that use less fuel • Annual fuel cost listed • Range of fuel economy listed • Odometer Protection • Can’t turn back/disconnect odometer

  14. Student Loans 2 types: • Government Student Loans • Subsidized - gvnt pays interest while still in school • Unsubsidized - student pays accrued interest • Private Student Loans • Loans goes through a bank • Based on tuition • Higher interest rates

  15. make minimum monthly payments have trouble making minimum monthly payments miss payments or pay late Total balance increases each month You receive second/third payment due notices from creditors Borrow money to pay off old debts exceed the credit limits denied credit Signs of Debt Problems

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