1. Borrowing Money
Unit 6

2. At the end of this lesson you should understand how debt management and creditworthiness impact an individual’s ability to become a RESPONSIBLE consumer and borrower.

3. Credit Card Video

4. Credit Cards
The average household receives five credit card offers per month in the mail, and more by telephone and the Internet

5. If you are going to get a credit card, it is important to understand what the offer you get in the mail means.
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6. How to choose You want a credit card with Low interest rate—APR
interest on a credit card would be NEGATIVE interest—you are having to pay it
Low or no annual fee

7. How to use The best way is for emergencies only.
If that’s not possible, use it for things you NEED.
Make sure you make payments ON TIME! Avoid late fees
Keep and maintain records
Make more than just the minimum payment— Remember—interest is building up and you are going to spend more the longer it takes to pay it off.
Let’s look at an example

8. Say your credit card statement balance is $3,000 and your minimum payment due is $20.
You submit your minimum payment on time and make no new charges on the card.
During the next billing cycle, the amount of interest accrued on the card balance is $95. (Note: This number is merely used as an example and not meant to reflect any specific APR.)
Your next credit card statement balance would then be $3,075, with a minimum payment due of $20.
You submit your minimum payment on time and make no new charges on the card .
During the next billing cycle, the amount of interest accrued on the card balance is $100.
Your next credit card statement balance would then be $3,155, with a minimum payment due of $20, and the cycle continues.

9. Online Credit Card Calculator
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10. Another way to use If you want to build your credit
Put some monthly expenses on your card
Put the money aside to pay for the bill
When the bill comes, pay the ENTIRE amount

11. Loans May be needed to pay for a large purchase
Has a specific repayment schedule
Sources of loans
Commercial banks, savings institutions, finance companies, credit unions, some automobile manufacturers

12. What I may need a loan for
Student loans—college
House
Car

13. What I need to look at when getting a loan
Amount
Interest rate (interest on a loan would be NEGATIVE interest—you are having to pay it)
Repayment schedule
Life of the loan (how long do you have to repay)
Do I need a cosigner?—(is my credit good enough or do I have enough credit history)

14. Good Credit
How do I get and maintain good credit?

15. Credit Score Video Clip
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16. Know what goes into your score
Pay your bills on time
Keep your credit card balances low
Manage your debt
Don’t close old credit cards
Limit your applications for new credit

18. Borrow, Do Not Borrow
Read each statement and decide whether you should borrow money or not.
Then explain why.

19. With the move to high-definition televisions, you decide to buy a new flat screen HDTV for your room.
Do not borrow
It is not NEEDED. Save up money and buy it if you must!

20. You have taken a summer job and need reliable transportation, so you decide to buy a used car.
Borrow
You need the car to get to work. You will be working so you can make payments. You are being sensible and buying a used car.

21. You are at the mall with friends and see a new pair of boots, but you do not have enough cash to buy them.
Do not borrow.
Do you have shoes on your feet? You do not NEED the boots. Save up your money…don’t use the credit card!

22. Your friend Harold just bought a new skateboard, so you want a new one too.
Do not borrow.
If you are going to borrow anything, borrow his skateboard. If you don’t have the money for your own, then you don’t need one.

23. You have just graduated from college and have a new job
You have just graduated from college and have a new job. You have enough money for a down payment on a house, but need a loan to buy a house.
Borrow
A house is a good investment. You have money for a down payment which will bring your monthly payment down. You also have a job so you will have money for payments.

24. You have maxed out your credit card, so you are considering getting a loan to make your payments.
Do not borrow
Get a job—not a loan. You would be going into more debt to pay off part of your debt.

25. Your friends are going on a special trip to celebrate graduation, but you do not have the money to go.
Do not borrow.
You should get money for graduation gifts. Use that. If you do borrow, do it from a friend or family member.

26. You receive a scholarship to go to your favorite college, but it is not enough money to pay all of your expenses.
Borrow
You are investing in your education. Good investment!