Critical Thinking Questions
Scenario: A 6 year old asks you to explain interest.
Help the 6 year old understand interest.
Interest is a charge for borrowing money from other people, businesses, banks, etc. (It will always be more than original amount borrowed)
Paying your bills on time.
This is an initial payment made when purchasing a home.
Down Payment
True or False:
Car loans typically have the same loan terms as mortgages.
False. Auto loan terms are usually shorter than mortgages.
FAFSA.
This form is an application to receive aid from the federal government.
How does credit score and financial stability work together?
Describe the difference between a debit card and a credit card.
A debit card is essentially cash. You are spending money that you deposited into your checking account.
A credit card is borrowed money that you need to pay back at a later date.
Location is so important because the main goal in real estate is to achieve a larger amount of equity (ownership)
The better the location, the higher the appreciation or value of home is over time.
Used to help consumers compare credit cards and understand disclosure agreements.
Loans, Grants, Scholarships, Work - Study Programs
Credit Cards: As our monthly balance continues to rise, so does our...? Why?
Our monthly minimum payment. The lender is requiring us to pay more each month to cover the large amount of debt being accrued by the borrower.
A poor credit score can result in a lack of access to credit like mortgages, cars, etc. It also may keep you from renting an apartment, obtaining or job, or even having access to utilities like electric.
What is the difference between monthly mortgage payments, and monthly rent payments?
Monthly mortgage payments are payments made towards your equity in the home (ownership).
Monthly rent payments have no impact on your ownership of the home and provide revenue/equity to an outside source.
Amount of time provided to pay off balance before interest and fees are charged.
Grace period
Over time, homes USUALLY increase in value, therefore increasing the owners equity in the home. What are some factors that can decrease a homes value over time?
What is one way credit card companies entice users to spend money on their card?
They use predatory marketing practices with 'to good to be true' offers. They also provide users with rewards like airline miles, cash back, and more.
What is equity, and how can this be used this to provide financial security to an individual?
Equity is the difference between the current value of a home, and the amount owed on a mortgage.
The equity (ownership) can be used as collateral to borrow funds, make a sale, etc. for other financial avenues.
True or False:
Car loans and mortgages have the same loan term to monthly payment relationship.
Explain the difference between Direct Subsidized Loans and Direct Unsubsidized Loans.
Direct Subsidized Loans the government pays accrued interest while you are still in school.
Direct Unsubsidized Loans the government does NOT pay accrued interest while you are in school.
Homes typically appreciate in value over time. Also, homes can be renovated and improved to enhance their value.
Cars lose 10% of their value as soon as they are bought, and typically obtain lots of wear and tear (damage) in a short amount of time.
Describe the relationship between the balance on a credit card, and the credit limit.
The balance shows the total amount of money owed on a card, while the credit limit shows the total amount of money one is able to borrow on a card.
Describe the relationship between loan term and monthly payment amount.
The longer the loan term, the lower the monthly payment.
The shorter the loan term, the higher the monthly payment.
Why is understanding how student loans operate so important to our future financial success?