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Credit & Debt Management

Credit & Debt Management

Assessment

Presentation

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University

Easy

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15 Slides • 9 Questions

1

Credit and Debt Management

2

Credit & Debt Management Pre-Test

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3

What is Credit?

  • The ability to borrow money or access goods or services with the understanding that you'll pay later

  • When you borrow you are making a promise to repay, usually including interest

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4

The Three C's

  • A person's reputation for paying bills when due

  • a.k.a. Credit Worthiness

Character

Capacity

Collateral

  • An asset pledged to the creditor until the credit obligation is paid

  • Your ability to pay your debts

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5

Open Ended

What is one of the Three C's of Credit?

6

How to Maintain/Improve Credit

  • Limit spending to needs, not wants

  • Remember that credit cards are loans

  • Keep a low balance

  • Charge less than the maximum amount available (no more than 30%)*

  • Keep the record of your purchases to avoid overspending

  • Always pay on time!*
    If you can't pay your bill, contact your creditor. Request (in writing) a reduced payment schedule

  • Negotiate a payment plan that you can afford

7

Disadvantages of Bad Credit

  • Higher interest rates

  • Limited sources of credit

  • Limits employment opportunities

  • Higher insurance premiums

  • Difficulty in obtaining credit approval

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8

Open Ended

What is one way to maintain/improve credit?

9

Are you ready to get a credit card?

  1. Do you have stable, consistent income?

  2. Are you financially disciplined?


Must be "yes" to both questions to justify getting a credit card

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10

Determinants of Loan Cost

  • Interest rate/Annual Percentage Rate (APR)

  • Term of the loan

  • Length of employment

  • Your credit score

  • Your credit history

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11

Open Ended

What can you use to establish credit without having a credit card?

12

What is Debt?

  • The amount owed by the borrower to the lender

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13

Good Debt vs. Bad Debt

  • Money owed for things that do little to improve your financial outcome

  • Money owed for things that can help build wealth or increase income over time

"Good Debt"

"Bad Debt"

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14

Draw

Draw an example of a "good debt"

15

Draw

Draw an example of a "bad debt"

16

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17

Open Ended

Should Elena get a credit card?
(Format example: No - has bad income)

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19

Open Ended

Should Miguel get a credit card?
(Format example: No - has bad income)

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21

Open Ended

Should Crystal get a credit card?
(Format example: No - has bad income)

22

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23

Open Ended

Should Marshall get a credit card?
(Format example: No - has bad income)

24

Credit & Debt Management Post-Test

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Credit and Debt Management

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