2. CHAPTER 12Slide 1 of 6 Chapter 12. Credit and Borrowing How, where, when and how much to borrow… Credit problems and how to deal with them A. The Concept of Buy Now, Pay Later B. What is Credit? 1. Access to Credit 2. Credit Needs 3. Credit Capacity 4. Credit Sources 5. Credit Reporting

3. CHAPTER 12Slide 2 of 6 C. How the Cost of Credit is Figured 1. Simple Interest 2. Add-on Interest 3. Discount Interest 4. APR - How Interest Costs are Expressed 5. Open-end Credit

4. CHAPTER 12Slide 3 of 6 D. Figuring Your Installment Loan Costs 1. Insuring Your Installment Loan 2. Paying Off an Installment Loan Ahead of Schedule 3. The Rule of 78s 4. Figuring Payoff - Crunching the Numbers 5. Refinancing an Installment Loan 6. Increasing an Installment Loan

5. CHAPTER 12Slide 4 of 6 E. Shopping for Loans (See Personal Action Worksheet, text page 327) 1. Interest Rates 2. The Effect of Down Payment Size 3. How Long Should the Loan Run? F. Home Equity Borrowing G. Do’s and Don’ts When You Apply for a Loan

6. CHAPTER 12Slide 5 of 6 H. Credit Abuses 1. Pyramiding 2. Over-securing 3. Loan Sharks 4. Loan Consolidation I. Cures for Overindebtedness 1. Debt-counseling Services 2. Bankruptcy (Chapter 13 and Chapter 7) J. Discipline

7. CHAPTER 12Slide 6 of 6 TALKING POINTS… Chapter Twelve, Number One You are burdened with a lot of pesky debts. The monthly payments are driving you crazy. You visit the Concrete Shoes Loan Company (E-ZEE CREDIT) to talk to a “debt counselor.” What potential problems are there in these sales-pitch items that he tosses at you? 1. “Instead of 10 monthly payments you’ll have only one.” 2. “Your monthly payment will drop from $680 to $295.” 3. “Having a good credit record with our company will be valuable to you.” 4. “The interest rate on the consolidated loan won’t be that much more than the average of what you’re paying now.” 5. “If you’re late making a payment to us, don’t worry - we’ll give you breathing room. Trust me.”