SSPLF5: Credit

Credit

• is being able to obtain money or goods or services in exchange for promise of payment in the future

• means buy now, pay later

• is the borrowing of money with a guarantee of repayment at a later date, with interest

• ties up future income in the obligation to pay & with the added charge of interest

• all of these choices describe credit.

Merchants and banks like to extend credit because

• that's the only way they can make money

• the government forces them to

• it's the right thing to do

• they like the interest they earn from their customers

The disadvantage with the "buy now, pay later" concept of credit is

• it means you can have items you want now & there are no consequences

• it ties up your future income and you pay more for your purchase because you have to pay interest

• you build credit history

• What disadvantage? There is no disadvantage

How are interest rates expressed?

• different ways, depending on the lender

• as a %

• numerically

• text

Banks collect interest for _____________ and pay interest for ______________.

• certificates of deposit; mortgages

• investments; car loans

• lending $; saving $

• savings accounts; lending money

When loaning money to customers, lenders consider the 3 C's of credit:

• capacity, consistency, competence

• character, capacity, collateral

• character, compassion, competence

• collateral, competitiveness, consistency

In the 3 c's of Credit, a person's financial character refers to

• the type of personality you have

• how likely you are to repay the loan

• a letter, number, or symbol on your computer keyboard

• how likely you are to use the loan

• none of these options refer to a borrowers financial character

Lenders generally assess a person's financial character by

• reviewing your credit history, recent credit transactions and overall credit score

• the type of books you purchase and read

• what you buy & how often you buy it

• how much money you spend on food and entertainment

Collateral can be defined as

• something of value used as a guarantee of repayment of a loan

• two items standing side by side vertically

• a purchase totally unrelated to a loan

• unintentional damage

Examples of collateral:

• title to your car for a car loan

• stocks, bonds, other investments or savings accounts

• deed to your house for a mortgage

• all of these choices are examples of collateral for a secured loan

• none of these are examples of collateral