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Determining Sources of Credit. Next Generation Science/Common Core Standards Addressed!.
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Next Generation Science/Common Core Standards Addressed! • CCSS.ELA Literacy.RST.11‐12.2 Determine the central ideas or conclusions of a text; summarize complex concepts, processes, or information presented in a text by paraphrasing them in simpler but still accurate terms. • CCSS.ELA Literacy. RST.9‐10.2 Determine the central ideas or conclusions of a text; trace the text’s explanation or depiction of a complex process, phenomenon, or concept; provide an accurate summary of the text.
Agriculture, Food and Natural Resource Standards Addressed! • CRP.01.01. Model personal responsibility in the workplace and community. • CRP.01.01.02.b. Assess personal level of responsibility and examine opportunities for improvement.
Bell Work! STUDENT LEARNING OBJECTIVES • Explain the use of institutional credit. • Understand the use of charge accounts. • Understand the use of credit cards. • Understand the use of installment plans.
Terms • Average daily balance • Charge account • Collateral • Cosigner • Credit card • Installment plan
Terms Continued • Institutional credit • Intermediate-term credit • Real estate financing • Revolving credit account • Short-term credit
Interest Approach • Make a list of items that can be purchased using 90 days, same as cash. • Why would a business would offer this arrangement? • What kind of problems can occur for the consumer?
How can institutional credit be used? • Institutional credit is obtained from organizations in the business of loaning money.
Credit • Short-term credit - usually paid back within one year. • Used to purchase small items.
Intermediate-term credit • Intermediate-term credit - paid back in one to five years. • Used to purchase a car for example or farm equipment.
Real estate financing • Real estate financing usually ranges from five to thirty years. • Used to purchase land, commercial buildings or houses.
Collateral • Collateral are the assets that are pledged to secure a loan. • In the event that the loan goes unpaid, The collateral may be sold to pay the loan.
Cosigner • If collateral is not available a cosigner, a person who shares responsibility for the loan if the borrower is unable to pay. • Most commonly a parent or relative.
Charge Account • A charge account is extended by retailers to those who purchase products from them. • This makes purchasing the product more convenient for the consumer or business employees. • An example is having a charge account at the local gas station. • Usually interest is waived for a period of time. • This type of credit may carry extremely high interest for unpaid balances. Normally paid off each month.
Credit Cards • A credit card is a plastic card with owner information that is used to conduct a credit transaction. • Many department stores and financial institutions offer credit cards. • The credit/debit card is now the most common means of business transactions.
Revolving Credit Account • Cardholder can pay the full amount or a minimum monthly payment. • Finance charges begin on the unpaid balance. • Cardholder has a set credit limit. • Finance charges are usually charged on the average daily balance. • Finance charges are generally very high compared to other credit sources.
Installment plans • Installment plans are a way of purchasing goods. • The buyer makes regular payments while taking immediate possession of the good. • The buyer does not own the product until it is paid for in full. • For example – a car, shop equipment, farm implements.
Installment Plans Continued • Usually a down payment is required. • Interest is usually figured into the payments. • Some retailers offer “90 same as cash” incentives where no interest is due if the total cost is paid within 90 days.
Review/Summary • Explain the use of institutional credit. • How are charge accounts used? • How are credit cards used? • What is the purpose of installment plans?