2. Ch. 8 Objectives Discuss living arrangements and financial issues that roommates face Describe contractual rights and responsibilities for landlords and tenants Discuss long-term debt options for the purchase of high-priced items Explain the purpose of a debt repayment plan List ways to reduce your credit costs and lower your dependence on credit. See Intro to Chapter Page 249-250 Slide 2

3. Slide 3 Buying a Car A car loan is usually an installment loan with monthly payments. 8-2 Long-Term Debt Repayment Make a down payment (cash deposit) toward purchase price. Can trade-in existing car as down payment. Consider a preapproved loan, dealer financing, or a lease.

4. Auto Depreciation Loss of value from original price Cars lose value after driven off car lot Becomes a used car See pages 258-259 * Be careful not to get “upside down” on your car loan – Have a good down payment, get a low interest rate Advantages of preapproved loan Leasing vs. Buying Slide 4

5. Slide 5 Buying a House 8-2 Long-Term Debt Repayment A down payment of 10 to 20 percent of the purchase price is often required. Property is used as collateral for the loan. A conventional loan lasts up to 30 years. Closing costs are expenses paid to get a loan, such as appraisal fees and credit report fees. A mortgage is a long-term debt agreement used to purchase real estate.

6. FHA Loans First time homebuyers Smaller down payment 3.5% down Average 640 credit score required Slide 6

7. Paying Down Debt: Student Loans Payments can be deferred Start 6 months after no longer registered for class Can choose to make earlier payments but not required Subsidized (interest starts after graduation) vs. Unsubsidized (starts accruing interest right away) Multiple loans can be consolidated Lower monthly payment But…always pay more than minimum! See page 262 Loan Forgiveness – by Federal Government Slide 7

8. Slide 8 What Is a Debt Repayment Plan? 8-2 Long-Term Debt Repayment A debt repayment plan is a strategy for paying off debt to reduce interest paid.

9. Paying Your Mortgage Choice of 15 year or 30 year Affects monthly payment and interest rate Balloon Payment Final payment is higher Could have a lower interest rate Lower monthly payments Lump sum at the end can be a negative Slide 9

10. Slide 10 How Can You Manage Credit Use? Pay bills on time to build a solid credit history. Pay entire amount to avoid paying interest. Establish a cash fund and have unused credit. 8-3 Credit Management Establish credit so it will be available in the future. (write checks, use a debit card, utilities in your name)

11. Slide 11 Study Credit Offers 8-3 Credit Management Compare disclosure terms. o Interest rates o Grace period o Annual fee o Minimum finance charge o Transaction fees o Cash advance fees o Late fees o Over-the-limit fees

12. Slide 12 Avoid Unnecessary Credit Costs 8-3 Credit Management Keep the number of credit cards and accounts to a minimum. Comparison shop for credit cards. Consider special deals and financing. Use credit to get sale prices. ( Not a good idea in my opinion) Time your credit purchases. Get cash rebates and rewards. Pay bills on time or early.

13. EXIT TICKET 1.Write a short paragraph or two explaining how someone you know (don’t give names!) or someone on TV or in a movie has overextended his/her credit. 2.Discuss what that person could have done differently. 3. Write your level of understanding (1-4 based on goal scale) on your paper. Slide 13

14. Slide 14 What Are Shared Responsibilities? 8-1 Identifying Financial Issues Shared responsibility is when two or more people agree to bear a portion of an obligation. A roommate is a person with whom you share living space and responsibilities.

15. Considerations for Roommates Living Habits Smoking/Drinking Cleanliness Social Life Chores Financial Income Security Deposit Slide 15

16. Slide 16 Group Budget 8-1 Identifying Financial Issues Group budgeting allows allocation of expenses so that each person pays his or her share.

17. Slide 17 Tenant Rights and Responsibilities 8-1 Identifying Financial Issues Rights To possess and enjoy the property To come and go and have guests To use common areas, such as pools Responsibilities To use the property only as intended To care for the property and report repairs To obey the rules

18. Slide 18 Landlord Rights and Responsibilities 8-1 Identifying Financial Issues Rights To receive rent in a timely manner To inspect the property Responsibilities To provide a safe, sanitary, and habitable living site To provide a convenient way to pay rent To keep security deposits in a separate account and refund unused portions

19. Slide 19 Focus On... Page 253,255 Reading a Lease Agreement: A lease is a property rental agreement that lasts a year or longer. A month-to-month agreement means you can leave with a 30-day notice. A lease gives you the security of knowing property is committed for a fixed time period. Read a lease agreement carefully before signing to avoid traps. 8-1 Identifying Financial Issues