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Consumer Credit

Consumer Credit. Credit Cards and Consumer Loans. Consumer Credit - is the use of credit for personal needs other than purchasing a home .

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Consumer Credit

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  1. Consumer Credit Credit Cards and Consumer Loans

  2. Consumer Credit - is the use of credit for personal needs other than purchasing a home. - can be borrowed from a friend or family member, a firm with which you do business, or a financial institution (such as a bank, credit union, insurance company). What Is Consumer credit?

  3. Common Types of Consumer Credit • Credit Card Accounts • Automobile loans • Home Equity Loans • Student Loans

  4. Consumer Credit Advantages • Buy Now, Pay Later • Convenience and Safety • Source of Emergency Cash • Financial Statement Impact • Increased Cost • Risk of Overspending • Higher Insurance Premiums Disadvantages

  5. Five C’s of Credit • Capacity- a lender’s assessment of your ability to repay your debt. • Capital- household’s net worth • Collateral- a loan protected by collateral (e.g.., a car or home) • Character- your previous credit, employment, and education history • Conditions- every loan and every borrower represents a unique situation

  6. Types of Consumer Credit • Closed-end credit- is a credit that lenders approve for a specific purpose, it must paid back with interest in a single payment or in installment payments. • Examples: Mortgage loans, Car Loans, Student Loans and Installment Contracts

  7. Types of Consumer Credit • Open-end credit- also called revolving credit, is not earmarked for a particular purchase and the payment period is not specified in advance. • Examples- credit cards, retail cards, travel and entertainment cards, and a home equity line of credit.

  8. Quiz • Consumer Credit is: • Used for purchasing a home. • Borrowed money used for personal needs. • Borrowed money from family, friend, firms or banks. • Both B and C is correct.

  9. Quiz • What is an advantage of Consumer Credit: • Financial statement impact. • Risk of overpending. • Increased cost. • Buy now, pay later.

  10. Quiz • What is an example of Open-End credit: • Mortgages. • Car Loans. • Student Loans. • Credit card or Bank Card.

  11. Quiz • Disadvantages of Consumer Credit: • Buy now pay later. • Convenience and safety • Risk of Overspending. • Source of emergency cash.

  12. Quiz • What is Closed-End Credit : • Credit card and bank cards. • Mortgage and Car Loans. • Travel and entertainment cards. • Home equity line of credit.

  13. Quiz • Which is a safer loan : • A personal loan not protected. • A collateral loan.

  14. Quiz • What is Capacity?: • Every loan and every borrow represents a unique situation. • Household’s net worth. • A lender’s assessment of your ability to repay your debts. • Source of emergency cash.

  15. Consumer Credit Credit Cards and Consumer Loans What Will You Decide?

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