Financial Literacy: Odds and ends Spring Semester 2019 Stater

Borrowing Money Down payment Interest Collateral Principal The full amount of money you originally borrow Down payment Upfront cash payment for a good you want to purchase Interest Must repay a percentage of your principal Collateral Piece of property that reduces the lender’s risk

Types of Loans Credit cards Student loans Personal loans For education Personal loans Mortgage loans For homes Auto loans

Insurance A financial service that allows a consumer to share liability with a company Can help you manage financial risks

How It Works Insurance companies create a pool of funds to handle risk Consumers pay fees to buy insurance Fees are pooled together into a large fund When consumers experience a loss, they are compensated from the pool in a payout

3 Types of Payments Copayment – may have to be paid to share the costs of a payout Often for doctor’s appointments Lowers shared expenses for the pool Premium – must be paid to take part in a pool (often monthly) Deductible – must often be paid before making a claim

Common Types of Insurance Homeowner’s insurance Renter’s insurance Auto insurance Health insurance Disability insurance Life insurance