SECTION # 1

-Establishing Credit: To take advantage of benefits using credit, you need to know how to apply for credit.

-Capacity To Pay: Your in income and the debt you already have will affect your ability to pay additional debts

-Character: Creditors want to know what kind of person they will be lending to.

• Collateral: Is a form of security to help garuntee that the creditor will be repaid.

-Buying Credit: When you use an installment loan, you usually make a down payment. Getting a cash loan is another way to pay for an expensive item.

• Down Payment: Is a portion of the total cost paid with cash or a check.
• Principal: Is the amount of money owed as a debt upon which interest is calculated.
• Interest Rate: Which is stated percentage of the principle , and the length of the loan.
• Secured Loan: Is if the cash loan is backed by collateral.
• Unsecured Loan: Is if the cash is NOT backed by collateral.
• Cosigner: The cosigner agrees to make the payment if you cannot.

-The Cost of Credit: When you are given credit, the security agreement explains the interest rate and finance charges.

• Finance Charges: Is the cost of credit stated in dollar and cents figure.
• Annual Percentage Rate: Indicates how much credit costs you on a yearly basis.

Quick Checks

#1 What 3 factors do creditors examine when deciding if a person is a good credit risk?.

#2 What is a Finance Charge?

#3 What does an annual percentage rate indicate?