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10-3 (pages 332 – 339) Sources of Consumer Credit

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10-3 (pages 332 – 339) Sources of Consumer Credit. 2 Basic forms of borrowing: . Types of Credit. Secured loan -- The property pledged is called You agree to give up this property if you fail to make your payments. Installment loan —

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types of credit
Types of Credit
  • Secured loan--

The property pledged is called

You agree to give up this property if you fail to make your payments.

Installment loan—

(Example—a monthly payment for a car loan)

Called closed-end credit—money borrowed for a particular amount and

types of credit continued
Types of Credit (continued)
  • Unsecured loan—loan not backed by any

Usually charge

Are hard to obtain.

for the lender.

where do you get credit
Where do you get credit?


  • Savings and loan associations

Shop around for a loan—interest rates differ from one institution to another.

Look for “special deals” offered periodically

other places to get credit
Other places to get credit:

Finance Companies—lend to people with

Charge high interest rates

Life Insurance Companies—may be able to use your life insurance policy as

But, if you don’t pay back the loan by the time you die, your policy benefits are

other places to get credit continued
Other places to get credit (continued)

Credit Card Cash Advances—You can borrow against your

High interest rate (often up to 24%) and a fee of 3% of the cash advance.

Pawnbrokers—You turn over personal property (TV, jewelry, antiques, etc.) to get a loan. If you pay back the loan, you get your property back. If not,

other places to get credit continued1
Other places to get credit (continued)

Rent-to-own companies—You make payments for an item usually on a weekly basis. Once all the payment are made, you own the product.

Interest rates can be as high as

types credit cards
Types Credit Cards

1.Regular charge accounts—you must pay your each month in full within a specified amount of time.

types of credit cards continued
Types of Credit Cards (continued)
  • Revolving Charge Accounts—Allows you to carry a balance from one month to the next.

You only must pay a

each month, and can let the rest “revolve” into the next month.

Can take months or even years to pay off.

Or, pay the entire balance each month by the due date and pay

where do you get a credit card
Where do you get a credit card?



Gasoline Companies

Large companies—


what does a credit card cost
What does a Credit Card Cost?


Interest—to be paid on unpaid balances. Most interest rates are

Penalties—charged if you go over your

grace period
Grace Period

Is the time between the billing date and the payment due date when

(usually 15 – 25 days)

control credit card costs
Control Credit Card Costs

Chose a loan instead of a credit card for

Don’t pay —a large part of this is interest, so you don’t reduce your debt much

Choose the