4.1 A Notes: Intro to consumer credit

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4.1 Introduction to Consumer Credit

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Presentation transcript:

4.1 A Notes: Intro to consumer credit

vocabulary Credit- When something is bought that is NOT paid for at time of purchase. DEBTOR - a person who uses credit. Creditor- organizations or people that extend CREDIT to consumers. Assets- EVERYTHING you own- your home, car, bank accounts, and other personal possessions. EARNING POWER- your ability to earn money now and in the future. Credit Ranking- a credit REPORT CARD that shows how well a user of credit meets financial obligations. These records are used by creditors when they decide to issue credit.

VOCABULARY Credit REPORTING Agency- agency which compiles records on all users of credit. FICO score- the most popular credit score named for its creator Fair, Isaac and Company. These scores range from 300 to about 850, summarize the probability that debtors will repay their debts. A HIGHER score indicates a better credit rating. Installment Plan- the convenience of paying for merchandise or services over a PERIOD of TIME. DOWN Payment- The customers pay PART of the selling price at the time of PURCHASE. Interest or FINANCE charge- a fee that is charged and added to the cost to installment buyers.

FORMULAS TO KNOW Monthly payment = Principal paid + Interest paid Interest = total amount paid – actual price of item (also called finance charge) Simple Interest: I=prt

EXAMPLE ONE Heather wants to purchase an electric guitar. The price of the guitar with tax is $2,240. If she can save $90 per month, how long will it take her to save up for the guitar?

EXAMPLE TWO Kristen bought a golf cart for $1850 on the installment plan. There is a 10% down payment and 18 monthly payments of $105 each. How much is the down payment? How much is the total of the monthly payments?

EXAMPLE TWO How much was the total payment on the installment plan? What was the finance charge?

EXAMPLE THREE Brant bought a $1,455 drum set on the installment plan. The installment agreement included a 15% down payment and 18 monthly payments of $80.78 each. How much is the down payment? What is the total of monthly payments?

EXAMPLE THREE How much is the total paid for the drum set on the installment plan? What was the finance charge?

EXAMPLE FOUR Trevor bought a $1,980 laptop on the installment plan. The installment agreement included a 10% down payment and monthly payments of $116.00 each for a year and a half. How much is the down payment? What is the total of monthly payments?

EXAMPLE FOUR How much is the total paid for the laptop on the installment plan? What was the finance charge?

EXAMPLE FIVE Zeke bought a $2,300 bobsled on the installment plan. He made a $450 down payment, and he has to make monthly payments of $93.50 for the next two years. How much interest will he pay?