Credit Theodore Roosevelt High School

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        Law in Society

 Objective: To understand the
use of and acquisition of credit.
What is it?
 Credit
 Creditors
 Debtors
 Finance charge
 Interest
 Unsecured credit
 Secured credit
 Collateral
 Annual percentage rate
How much do you owe?
You buy a dozen DVDs on sale for $99.00.
And you charge it on your credit card.

You receive your billing statement indicating
  that you owe $99.00. Your interest rate is
  1.5% What is your balance?
How much do you owe?
 You pay $40 of the bill.
 The next month you receive your
  statement. Now what is your balance?

 40.00 X .015 = $0.60
 Balance: $40.60
What is the difference between a debit
card and a credit card?
 Credit Card = borrowed money
 Debit Card = your savings or checking
When to use credit…
   Is it worth having the item before you have
    saved enough money to pay for it?
   What items are good long-term investments or

   Car, home, large necessities, education…
   75% of Americans carry some debt.
   Using credit can make items cost more.
   Credit card users spend more.
Variable interest rates
 Good and bad.
 Rates can go down or up.

   Currently many home buyers who
    purchased that obtained variable rate
    loans are not able to pay. Foreclosure.

   Video
What do lenders want to know before
giving you credit?
 Are you reliable?
 Are you stable?
 Do you have a steady income?
 Are you able to afford what you buy?
 Do you have a good credit history?

   Equal Credit Opportunity Act
       Protects consumers based on sex, age, marital
        status, race, religion, etc….
Costly Credit Arrangement
   Warning!!!!!!

   Balloon payment
       Last payment larger than the rest
   Acceleration clause
       Miss payment-lender can demand faster
   Bill consolidation
       All debts combined under one rate
Truth in Lending Act
   Creditor must tell you in writing:
       Before you sign
       Finance charge
       APR
       Rules for late payments
Denied Credit?
 Poor risk???
 Equal Credit Opportunity Act
       Creditors must inform consumers why they
        were denied.
       Ability to know info in your credit file and
        dispute errors.
   Unable to pay off loan for whatever

   What can you do…?
       Start a budget
       Notify creditors immediately.
       Seek consumer credit counseling.
       Seek assistance from friends and family.
 Cannot pay
 Assets put in hands of federal courts to
 Long-term consequences
 Stain on credit for 10 years or more
 No escaping taxes, child support, student
  loans, alimony
Creditor Collection
 Repossession
 Court Action – sue
       Results
            Garnishment - withhold money from your check
            Attachment – force bank to pay creditor from debtor

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