Grade 9 PF: Types of Credit

Why use credit

-instant gratification -signup bonuses -rewards and points -convenience -emergencies

How can you increase your credit score

-involved in different types of credit (revolving, installment, etc) -pay bills on time -keep balances low on revolving credit -pay off debt instead of moving it around

Variable Rate 1. What is it? 2. What is its opposite?

1. A loan or savings account with an interest rate that may be changed in response to economic conditions 2. Fixed Rate

Installment Loan 1. What is it? 2. What is its opposite

1. A loan that is repaid over time with a set number of scheduled payments 2. Revolving Credit

Revolving Credit 1. What is it? 2. What is its opposite?

1. A type of credit that does not have a fixed number of payments -You can pay as much or as little as you want each month as long as you pay the minimum amount each month 2. Installment Loan

Small Business Loan (from bank) 1. Installment Loan or Revolving Credit 2. Secured Debt or Unsecured Debt 3. Variable Rate or Fixed Rate

1. Could be either -Installment loans can use your businesses property as collateral (includes real estate space, business equipment or a company car) -Revolving is also an option typically used to get a smaller interest rate or borrowing more money in exchange for business property as collateral 2. Could be Either -Secured Debt: less risky, lower interest rates, higher loan -Unsecured Debt: smaller loans, more requirements for borrower (a company needs to have been in business for at least two years, and show earnings of $100,000 or more annually)

Unsecured Debt 1. What is it? 2. What is its opposite?

1. Debt is not tied to a specific asset; there is no collateral that can be repossessed if borrower defaults -they will hire a debt collector to coax you to pay the debt - the lender may sue you and ask the court to garnish your wages, take an asset, or put a lien on your assets until you've paid your debt -report the delinquent payment status to the credit bureaus to be reflected on your credit report 2. Secured Debt

Secured Debt 1. What is it? 2. What is its opposite?

1. Debt is tied to a specific asset that can be used as collateral and repossessed if borrower doesn't make payments 2. Unsecured Debt

What are the three companies that can give you a credit score

1. Experian 2. Equifax 3. Transunion

Payday Loan 1. Installment Loan or Revolving Credit 2. Secured Debt or Unsecured Debt 3. Variable Rate or Fixed Rate

1. Installment -It must be payed by your next paycheck 2. Unsecured -It is not tied to a specific asset 3. Fixed -The interest rate remains the same throughout the duration of the loan

Mortgage 1. Installment Loan or Revolving Credit 2. Secured Debt or Unsecured Debt 3. Variable Rate or Fixed Rate

1. Installment -There is a set number of scheduled payments 2. Secured -A mortgage is tied to a house 3. Could be either -depends on the agreement/contract

Student Loan (Federal) 1. Installment Loan or Revolving Credit 2. Secured Debt or Unsecured Debt 3. Variable Rate or Fixed Rate

1. Installment -There is a set schedule that you must pay each month 2. Unsecured -The lender can not "repossess" your education 3. Fixed -Interest rate does not fluctuate

Personal Loan (from bank) 1. Installment Loan or Revolving Credit 2. Secured Debt or Unsecured Debt 3. Variable Rate or Fixed Rate

1. Installment -There is going to be a set, scheduled number of payments 2. Unsecured -not tied to a specific asset 3. Could be Either -depends on the deal/contract

Auto Loan 1. Installment Loan or Revolving Credit 2. Secured Debt or Unsecured Debt 3. Variable Rate or Fixed Rate

1. Installment Loan -There is a set number of scheduled payments 2. Secured Debt -A car is a physical asset that can be reclaimed

Fixed Rate 1. 1. What is it? 2. What is its opposite?

1. Interest rate remains constant during the duration of the loan 2. Variable Rate

Credit Card 1. Installment Loan or Revolving Credit 2. Secured Debt or Unsecured Debt 3. Variable Rate or Fixed Rate

1. Revolving -the pay period can vary 2. Unsecured -The credit card is not tied to a specific asset and it can not be repossessed 3. Could be either - dependent on the agreement the interest can change or stay the same

What are the 4 main types of credit

1. Revolving Credit -no maturity date 2. Installment Credit -comes in pieces (equal payments) 3. Cash Loans -aka personal loans have no specific purpose -can pay principal and interest all at once or you can make payments over time for large amounts 4. Service Credit -lets you pay in full (typically monthly) for a service -phone service or electrical service -service provider can deny your application for service based on your credit history -similar to revolving credit you will not pay interest or late fees if your payment is in by the due date

What is a Payday Loan

A relatively small amount of money lent at a high rate of interest on the agreement that it will be repaid when the borrower receives their next paycheck

What is a Grace Period

Amount of time before interest starts accumulating on charged purchases

What is APR

Annual percentage Rate- consistent way to report interest

What is the equation for calculating simple interest

P x R x T Principle ($ you are borrowing) x Interest Rate (decimal number) x Time (number of years)

What is a Maturity Date

When a final payment for a loan is due

What does a credit score indicate

what kind or how good of a borrower you are