Credit and Debt Chapter 11.

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Presentation transcript:

Credit and Debt Chapter 11

Understanding Credit What if you really want or need something, but don’t have the cash for it? Credit is a loan Open-Ended Credit: can be increased by the debtor by continuing to purchase things (up to a certain limit) Ex: Credit Card- Visa, Macy’s, Target Closed-Ended Credit: Given for a specific amount, cannot be increased with additional purchases. Pay back in monthly installments Ex: Loan for a vehicle

How to get Credit Fill out an application Credit history Your income Your assets Lenders want to know if you are a credit risk

How to get Credit cont… Secured Transactions- backed up by property (collateral) that the creditor can take The creditor gains security interest when the debtor defaults Unsecured Loans- higher interest; offered only to well- established business owners or customers Secured party = lender holding security interest

How to get Credit cont… Attachment of Security Interest When legally enforceable by the secured party Debtor owns collateral Secured party transfers something of value (money, goods) Secured party either takes possession of the collateral

Guarantors A loan can be protected by having another party stand behind the loan to guarantee it will be repaid. Guarantor: A second party