2. To be able to recognize the main types of credit, & the
process for earning credit. 3. When goods, services, or money is
received in exchange for a promise to pay in the future, with
interest. Lender- the person or organization who has the ability to
provide the individual with a loan. Borrower- the person or
organization that is receiving the money from the lender. 4. When a
lender is considering granting credit to the borrower, they need to
believe the borrower has the ability and the willingness to pay
them back. How do they decide whether or not to give you a loan? 5.
Character - a persons honesty and reliability, determined by their
history of repaying bills on time. Capital - an evaluation of a
persons net worth. Capacity - the income a person has to be able to
repay the loan. Based on job status and how many other loans they
may have. Collateral - property which can be seized (taken) if a
person does not repay the loan. Conditions - the general state of
the economy. 6. To be able to recognize the main types of credit,
& the process for earning credit. 7. Types of Credit Personal
Finance 8. 1. Installment Loan A one time loan which the borrower
must repay the amount in a specified number of equal payments. Ex:
Car Loan ($10,000 at 9% for 48 Months) Payment = $249/month After 4
Years, the car costs you about $12,000 9. 2. Student Loans An
Installment Loan from the government to help pay for college. No
payments until out of school! Interest rates usually lower a banks.
People pay on these loans for a very long time! 10. 3. Credit Cards
Standing line of credit to use at any time. Credit Limit the
maximum you are allowed to borrow. APR (Annual Percentage Rate) The
total interest you will be charged each year. (1 27%) 11. 3. Credit
Cards Finance Charge The amount you are charged above your
principal each month. Minimum Payment Usually 2% or $10 each month.
12. 4. Mortgage An Installment loan for the purchase of a house
Most Mortgages are for 30 years 13. 4. Mortgage Payment includes:
Principal (goes up each month) Interest (goes down each month) City
Taxes (Usually about 1.5% of cost per year) Mortgage Insurance
(About $475 per year) PMI (If you put less than 20% down - usually
between $50 and $80 per month until 20% paid) 14. $100,000 Loan at
6%, with 2% down payment: Payment (including interest) = $600 City
Taxes (1.5% x 100,000 / 12) = $125 PMI = $ 80 Mortgage Insurance =
($475 / 12) $ 40 TOTAL MONTHLY PAYMENT = $845 Calculator
