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Transcript of CONSUMER CREDIT
for personal needs (except a home mortgage) by individuals and families, in contrast to credit used for business purposes. Using credit to purchase goods and services may allow consumers to be more efficient or more productive or to lead more satisfying lives. USES AND MISUSES OF CREDIT Shopaholics and young adults most vulnerable to misusing credit. enables people to enjoy goods and services now ADVANTAGES OF CREDIT permit the purchase of goods even when funds are low credit cards also provide shopping convenience and the efficiency of paying for several purchases with one monthly payment. credit is more than a substitute for cash credit indicates stability temptation to overspend
does not increase total purchasing power
credit costs money DISADVANTAGES OF CREDIT 1. CLOSED-END CREDIT TYPES OF CREDIT you pay back one-time loans in a specified period of time and in payments of equal amounts. three most common types of
closed-end credit installment sales credit -is a loan that allows you to receive
merchandise, usually high-priced items
such as large appliances or furniture. installment cash credit -is a direct loan of money for personal
purposes, home improvements, or vacation
expenses. single lump-sum credit -is a loan that must be repaid in total on
a specified day, usually within 30 to
90 days. 2. Open-End Credit line of credit the maximum dollar amount of credit the lender has made available to you. Incidental credit is a credit arrangement that has no extra costs and no specific repayment plan. Revolving check credit Credit Cards Cobranding is the linking of a credit card with a business trade name offering points or premiums toward the purchase of a product or service. Debit Card electronically substarcts from your account at the moment you buy goods or services. Travel and Entertainment (T&E) Cards Charge card used to pay for hotel,
airline, and other business
related expenses. Home Equity Loans is based on the difference between the current market value of your home and the amount you still owe on your mortgage. revolving line of credit is an arrangement whereby borrwoings are permitted up to a specified limit and for a stated period, usually 5 to 10 years. General Rules of Credit Capacity DEBT PAYMENTS-TO-INCOME RATIO dividing your monthly debt payments by your net monthly income. DEBT-TO-EQUITY RATIO dividing your total liabilities by your net worth. COSIGNING A LOAN be sure you can afford to pay the loan.
consider that even if you are not asked to repay the debt, your liability for this loan may keep you from getting other credit you want.
before you pledge property such as your automobile of furniture t secure the loan, make sure you understand the consequences.
Check your state law.
Request a copy of overdue-payment notices be sent to you so that you can take action to protect your credit history. a prearranged load for a specified amount that you can use by writing a special check.