Transcript Chapter 12

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
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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
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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
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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
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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
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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.”
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