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  • 1.  
  • 2. Introduction <ul><li>Instructor and student introductions </li></ul><ul><li>Module overview </li></ul>
  • 3. Student Introductions <ul><li>Your name </li></ul><ul><li>Expectations, questions, and concerns about borrowing money </li></ul>
  • 4. Purpose <ul><li>Borrowing Basics: </li></ul><ul><li>Describes how credit works and the types of credit available. </li></ul><ul><li>Helps you determine if you are ready to apply for credit. </li></ul>
  • 5. Objectives <ul><li>By the end of this course, you will be able to: </li></ul><ul><li>Define credit. </li></ul><ul><li>Explain why credit is important. </li></ul><ul><li>Distinguish between secured and unsecured loans. </li></ul><ul><li>Identify three types of loans. </li></ul>
  • 6. Objectives (Continued) <ul><li>Identify the costs associated with getting a loan. </li></ul><ul><li>Explain why it is important to be wary of rent-to-own, pay-day loan, and refund anticipation services. </li></ul><ul><li>Determine if you are ready to apply for credit. </li></ul>
  • 7. Agenda and Ground Rules <ul><li>60 – 90 minutes long </li></ul><ul><li>One 10-minute break </li></ul><ul><li>Training methods </li></ul><ul><li>Class participation </li></ul>
  • 8. Credit <ul><li>Credit is money you borrow to pay for things. </li></ul><ul><li>It is also called a loan. </li></ul><ul><li>“Good” credit means making payments on time. </li></ul><ul><li>“Bad” credit means it will be harder to borrow in the future. </li></ul>
  • 9. Why Credit Is Important <ul><li>It can be useful in emergencies. </li></ul><ul><li>It’s more convenient than carrying cash. </li></ul><ul><li>It lets you make large purchases. </li></ul><ul><li>It can affect your ability to get employment, housing, and insurance. </li></ul>
  • 10. Collateral <ul><li>Property or another asset you promise to give to the bank if you can’t repay your loan. </li></ul>
  • 11. Collateral Items <ul><ul><li>Car Property </li></ul></ul>
  • 12. Types of Loans <ul><li>Consumer installment loans </li></ul><ul><li>Credit cards </li></ul><ul><li>Home loans </li></ul>
  • 13. Consumer Installment Loan <ul><li>A loan used to pay for personal expenses: </li></ul><ul><li>Automobile </li></ul><ul><li>Computer </li></ul><ul><li>Furniture </li></ul><ul><li>College tuition </li></ul>
  • 14. Credit Cards <ul><li>Give you the ongoing ability to borrow money for: </li></ul><ul><li>Household, </li></ul><ul><li>Family, and </li></ul><ul><li>Personal needs. </li></ul>
  • 15. Home Loans <ul><li>Home purchase loans </li></ul><ul><li>Home refinance loans </li></ul><ul><li>Home equity loans </li></ul>
  • 16. Practice Exercise – Types of Loans <ul><li>Instructions: </li></ul><ul><li>Read the description of the purchase to be made. </li></ul><ul><li>Fill in the blank with the name of the most appropriate loan type for that purchase. </li></ul>
  • 17. The Cost of Credit <ul><li>Fees </li></ul><ul><li>Interest </li></ul>
  • 18. Fees <ul><li>Annual maintenance fees </li></ul><ul><li>Service charges </li></ul><ul><li>Late fees </li></ul>
  • 19. Interest <ul><li>The money financial institutions charge for letting you use their money. </li></ul><ul><li>The rate of interest is either: </li></ul><ul><li>Fixed </li></ul><ul><li>Variable </li></ul>
  • 20. How Much Does Credit REALLY Cost? <ul><li>Amount financed $5,000.00 </li></ul><ul><li>APR 12% </li></ul><ul><li>Finance charge $600.00 </li></ul><ul><li>Total paid $5,600.00 </li></ul><ul><li>Watch out for “penalty APRs” and “universal default” on credit cards. </li></ul>
  • 21. Practice Exercise – Borrowing Money Responsibly <ul><li>Instructions: </li></ul><ul><li>Read each question carefully. </li></ul><ul><li>Answer the question. </li></ul><ul><li>Be ready to support your answer. </li></ul>
  • 22. The True Cost of Alternative Financial Services <ul><li>Rent-to-own services </li></ul><ul><li>Pay-day loan services </li></ul><ul><li>Refund anticipation services </li></ul>
  • 23. Rent-to-Own Services <ul><li>You use the item by making monthly or weekly payments. </li></ul><ul><li>The store owns the item until you make your final payment. </li></ul><ul><li>Using rent-to-own services is more expensive than getting a consumer installment loan. </li></ul>
  • 24. Pay-Day Loans <ul><li>Loans that: </li></ul><ul><li>Are made for a fee to people who need money right away. </li></ul><ul><li>Are paid back with the borrower’s next paycheck. </li></ul><ul><li>Are renewed for an additional fee if not paid off in the agreed-on time period. </li></ul><ul><li>Should be used only for emergencies. </li></ul>
  • 25. Refund Anticipation Loans <ul><li>These short-term loans are secured by your income tax refund. </li></ul><ul><li>The money for the loans comes from a bank or finance company. </li></ul><ul><li>They are more costly than you might think. </li></ul>
  • 26. The “Four Cs” of Credit Decision Making <ul><li>Capacity </li></ul><ul><li>Capital </li></ul><ul><li>Character </li></ul><ul><li>Collateral </li></ul>

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