October 17, 2011 Objective: Students will learn about credit and the different types of credit.

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Presentation transcript:

October 17, 2011 Objective: Students will learn about credit and the different types of credit.

Credit = Something borrowed 0 When credit is given, payment is not provided immediately creating a debt. 0 What would you want to know before offering to give someone, something on credit?

Credit Defined 0 The word credit has many meanings: 0 An arrangement for deferred payment of a loan or purchase. 0 A reputation of sound character or quality, standing. 0 When one has good credit they can get credit.

Why is credit important? 0 The average American household takes in $63,091 per year. 0 The average consumer spends $49,638 a year on a range of necessary and desired expenditures. 0 The average household owns 1.9 vehicles 0 67% are homeowners 0 Households average 2.5 people (1.3 are earners)

How do we spend our money?

How can you afford? 0 Average home price in Omaha $134,600 (more than 2 years household income) 0 Automobile: 0 Ford Focus: Average price $20,000 (4 months of annual household income) 0 Ford Fusion: Average price $30,000 (6 months of annual household income) 0 Ford F150: Average price $40,000 (8 months of annual household income) 0 The answer: Credit

Types of Credit Installment Credit This is credit that you use to borrow money and promise to repay in equal amounts over a specific period of time. 0 Example of an installment credit: You sign an auto loan in which you agree to pay the lender $400 each month for five years. Revolving Credit This is credit that allows you to borrow a pre- established amount repeatedly as long as your account is in good standing. You repay the amount borrowed in full or make a partial payment that is subject to interest and/or fees. 0 Example of revolving credit: You sign up for a credit card. You use it to make purchases and at the end of each month, you receive a bill. You can choose to pay off the balance in full or make the monthly minimum payment, or any amount in between. Open Credit This type of credit requires that all money borrowed must be repaid in full every month.

Conclusion 0 What was our objective for today? 0 Brainstorm types of credit: 0 Installment – examples? 0 Revolving – examples?