1 / 12

Credit

Credit. Learning Goals. Students will analyze the role and importance of credit in personal and business finance. Key Terms. Credit A privilege of using someone else’s money for a period of time Credit Worthiness Borrower’s ability to assume and pay back credit (debt) Collateral

lamond
Download Presentation

Credit

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Credit

  2. Learning Goals • Students will analyze the role and importance of credit in personal and business finance.

  3. Key Terms • Credit • A privilege of using someone else’s money for a period of time • Credit Worthiness • Borrower’s ability to assume and pay back credit (debt) • Collateral • Offers your house, car etc. to reduce risk of loan • Can usually get you a lower rate on a loan • Creditor • Any person that grants a loan or sells on credit • Debtor • Any person/business that buys on a credit or receives a loan

  4. Key Ideas • Credit Rating • Indication of the level of risk that consumers business or government will pose if credit is granted to them • Measure of worthiness • Shared by businesses • Credit Crisis • Being consistently unable to pay off credit cards • Using cash advances on everyday expenses • Not knowing how much debt you have • Seeming to always be in debt

  5. Advantages of Credit • Can make major purchases • Overcome cash-flow shortages • Company cards • Widely accepted as substitute for cash Can you think of any other advantages?

  6. Disadvantages of Credit • Increased costs • Defaulting on a loan • Overbuy • Financial difficulties Can you think of any other disadvantages?

  7. Credit Cards

  8. Installment Sales Credit • Is a credit plan that requires a purchaser to make a down payment and fixed regular payments with finance charges added to the purchase price • When buying expensive purchases such as a car • Bigger down payment is better • Term loan – a form of installment credit in which the borrower agrees to make fixed monthly payments over a set period of time (term) • Lease – similar but the borrower doesn’t actually own the asset it’s just a long-term rental • Demand loan – lender can require full payment at any point after the loan has been given

  9. 3Cs of Credit • Character • Borrower’s willingness to repay a loan, trustworthiness and reliability • “Will they repay their debt?” • Have you used credit before? • Do you pay your bills on time? • Do you have a good credit report? • Can you provide character references? • How long have you lived at your present address? • How long have you been at your present job?

  10. 3Cs of Credit • Capacity • Ability to make payments on time and pay a debt when it’s due • “Can they repay their debt?” • Do you have a steady job? If so, what is your salary? • How many other loan payments do you have? • What are your current living expenses? • What are your current debts? • How many dependents do you have?

  11. 3Cs of Credit • Capital • Value of borrower’s assets • “What do they own that could be given up if they cannot repay their debt?” • What property do you own that can secure the loan? • Do you have a savings account? • Do you have investments to use as collateral?

  12. To Do: • Complete the Credit – lesson 6 worksheet in the student common drive

More Related