Credit Cards
How do credit cards work?
You pay with the banks' money, and you pay it back
What is one reason a lender might deny your loan?
1. You fail to make payments on time
2. You don't have a high enough income
3. You are in too much debt
4. Low credit score
Why do most people get a mortgage when they buy a house?
Most people can't afford a house with the cash they have, so they apply for a mortgage to pay it off over time.
True or false: A down payment can significantly help reduce the long-term costs of a car
True
Name an example of revolving credit
Credit cards, home equity, personal lines of credit
How are credit cards different from debit cards?
With debit cards, you spend your own money from your checking account, but with credit cards, you are using the bank's money.
What’s the benefit of making more than the minimum payment?
Principal will decrease faster, which ultimately saves you time and interest.
What is one factor that affects a mortgage monthly payment's total interest owed?
1. The interest rate
2. The size of the down payment
3. Credit score
4. Extra monthly payments
What is better if you have $5000 to spend
Option 1: A $5000 down payment will save you more throughout the life of the loan.
Option 2: An additional $110 each month for 20 months will save you more throughout the life of the loan.
Option 1
What credit is a type of credit that allows you to borrow, repay, and borrow again up to a set limit. (You can repeatedly use the credit as you repay the balance.)
Revolving Credit
Why would it be a good idea to get a credit card as a teenager?
You can use your parents' credit score to help build your own.
What’s the benefit of refinancing to take a longer time to pay the loan?
The amount of your monthly payment will be lower
Name a disadvantage of mortgages.
1. You pay back more money than you borrow
2. Fees and additional costs
3. Risk of repossession
4. The financial commitment
Name a drawback of having a 0% APR on an auto loan
Could lead to higher interest rates, limited duration, and missed payments that could negatively impact the benefits
What credit is a type of credit where you borrow a fixed amount of money and repay it in fixed installments over a set period of time?
Installment Credit
Name one thing you should consider when selecting a credit card.
Annual fee, APR, penalty fees and rates, grace period, rewards, cash back, balance transfer, and travel mileage.
What is the most likely factor a lender will allow you to be a loan customer?
If you are successfully paying your bills back on time.
Home cost: $500,000. Down Payment: $35,000, Interest Rate: 7%, 20 Year Fixed. What is the monthly payment?
(Use the mortgage calculator)
$2,593
Name something you can do if you can't make full payments to your lender on time.
1. Call the lender to request refinancing so you can get more manageable monthly payments
2. Ask people you trust to help out
3. Sell the car or other assets to pay off the loan
What type of credit allows you to borrow money up to a set limit and repay it as you go?
Open Credit
Why is it important to read the fine print in your credit card's Schumer Box?
There might be hidden fees and expenses that can cost you a lot of money if you don't see them.
How do lenders maximize their profits by loaning money to customers?
Higher interest rates and longer terms
Home cost: $650,000. Down Payment: $45,000, Interest Rate: 6.92%, 30 Year Fixed. Interest rate: 10%. What is the monthly payment?
(Use the mortgage calculator)
$5803
What is the relationship between credit score and interest rate on car payments?
A higher credit score typically has a lower interest rate and a lower credit score typically has a higher interest rate
What credit is a type of borrowing where the borrowed amount is repaid in a single payment instead of through multiple installments?
Non-installment Credit