Personal Loans 101: UNDERSTANDING APR

Size: px
Start display at page:

Download "Personal Loans 101: UNDERSTANDING APR"

Transcription

1 Personal Loans 101: UNDERSTANDING APR

2 In today s world, almost everyone needs access to credit. Whether it is to make a small purchase, pay for an unexpected emergency, repair the car or obtain a mortgage on your first home, everyone must have access to affordable credit. But how do you choose the best loan to fit your individual circumstances? If you are like most Americans, you want a loan that is relatively easy to obtain and understand. You do not want to go through a lengthy, complicated and confusing process to determine what loan or credit product best meets your needs. You want an easy way to compare them. 2

3 The Annual Percentage Rate, simply referred to as APR, is one factor you can consider when comparing loans. Looking at several factors will help you make an informed decision about what type of loan, interest rate and term best meets your needs. 3

4 What Is APR and How Is It Used? The government, through the Truth in Lending Act (TILA), developed APR to assist consumers when comparing loans. Annual Percentage Rate is the cost of credit expressed as a yearly percentage. Most people assume that the APR is equal to the annual interest rate, but APR includes the interest rate plus some of the costs involved in getting the loan as well as any annual fees. Some loan costs that could be included in the APR are loan origination fees or processing fees. APR is a very useful tool when comparing similar type loans that have similar terms. For example, the APR on a 30-year fixed rate mortgage allows you to evaluate and compare loans from various lenders, and APR can be very helpful when purchasing a new car with a 60-month loan. These are apples to apples comparisons APR is a very useful tool in these examples. However, it becomes much more difficult to compare different types of loans with different terms and fees based only on APR. Suddenly APR, which was designed as a comparison tool, can become misleading and confusing. For example, consider a $100 loan that must be repaid after one month for 5% interest plus a $10 origination fee. After 30 days, you would owe a total of $115 to the lender. The math is simple: $100 loan plus $5 interest plus $10 fee. However, the APR calculation gets a little more complicated. Without the $10 origination fee, this loan has an APR of 60%. However, if the onetime fee of $10 is considered, the APR jumps to 180%. Now to confuse the matter further, if this were a two-week loan for the same amount and fees, the APR would skyrocket to 360%. Without the origination fee, the APR would be 120%. For the first loan, the borrower paid $15 for the use of $100 for one month, and for the second loan the borrower paid $12.50 for the use of $100 for two weeks. These examples clearly show that considering only the APR does not tell a borrower the complete cost of credit. Let s look at a few everyday examples of consumer transactions converted to APR using the formula from the Truth in Lending Act (TILA) for calculating APR. 4

5 Product Finance Charge Amount Financed Repayment Period APR $1,000 Credit Card Balance: Minimum Monthly Payment = $30 $410 $1, Months 18% $1,000 Installment Loan: Monthly Payment = $133 $596 $1, Months 96.53% $350 Payday Loan: Finance Charge = $15 per $100 borrowed $50 $ days % $20,000 Automobile Purchase: Monthly Payment = $ $2,955 $20, Months (5 Years) 5% Renting a $20,000 Car: Daily Rental = $110 $550 $20,000 5 Days 200% Bouncing a $60 Check: Bank Fee = $35 Merchant Fee = $25 $60 $50 10 Days 4380% These examples show how typical purchases and credit products can appear very expensive when viewed only in terms of APR. 5

6 Calculating the True Cost and Value of Loans The Truth in Lending Act (TILA) requires that lenders tell borrowers a loan s: APR the annual cost of credit expressed as a percentage; Amount financed the dollar amount of credit provided to a borrower; Finance charge the total dollar cost of credit; and Total payments the total amount of money that will be paid over the loan term. These factors can change dramatically with different credit products. The amount borrowed and term (amount of time to pay it back) impact all four of these factors. Rules of Thumb: Smaller Loan = Higher APR. Larger Loan = Lower APR. Shorter Term = Higher APR. Longer Term = Lower APR. These rules of thumb explain why a $500 payday loan for two weeks has an APR of 450%, a $500 installment loan for 7 months has an APR of 117.5%, and a $225,000 mortgage for 30 years has an APR of 4%. Of course, other factors are involved in setting loan rates, but these are the basic principles to understanding the true cost of credit. A smaller loan borrowed over a shorter period will cost less in total dollars, but have a higher APR. Why? One major reason is because each loan costs the lender relatively the same, regardless of size. Lenders spend the same amount of time and resources to evaluate a borrower s ability to repay a loan for $2,000 or $20,000. The lender s fixed cost for a larger loan is a smaller percentage, or APR, because it is distributed over a larger amount of money, while the fixed cost of a smaller loan is distributed over a smaller amount of money and often a shorter time period. 6

7 Knowledge Check: Which costs more? 1) $2,000 loan with an APR of 100% to be repaid in 6 monthly payments of $437.02; or 2) $5,000 loan with an APR of 24% to be repaid in 24 monthly payments of $ Answer: The out-of-pocket costs, or finance charge, for the $5,000 loan is $1,344.53, which is more than twice the finance charge of $ for the $2,000 loan. However, the monthly payments ($437.02) will be greater for the $2,000 loan than for the $5,000 loan ($264.36) Does this mean that you should get a larger loan because the APR will be lower? Absolutely not. Although you might save on the APR, you should not borrow more money than you need. Remember, your total out-of-pocket cost can be much greater for a large loan paid over a long period of time. More importantly, in addition to the APR, you should look at your monthly payment and ask yourself: Is it affordable? Can I fit this amount in my monthly budget? Credit Scores and APR You should know your credit score because it can directly impact the APR you are charged for a loan. For many types of loans, borrowers with high credit scores get lower APRs than consumers with lower credit scores or poor credit histories. This is especially true for car loans. Your risk of default also impacts the interest rate you will be quoted for a mortgage or credit card. Traditional installment lenders do not rate their loans based on each customer s credit score, but turn down approximately 50% of borrowers for loans because of a poor credit report or lack of credit history. The lesson here is: know your credit score it can impact your APR and, in many cases, it is the deciding factor for whether you are approved or rejected for a loan. 7

8 Monthly Spending Worksheet Use the Monthly Spending Plan shown below to determine if you have enough income to cover your living expenses. The only time to take on a new monthly credit payment is when you are spending less each month than you take home. The additional debt load should not cut into the amount you have committed to saving. Monthly Take Home Saving TOTAL INCOME $ Monthly Expenses: Mortgage Payment/Rent Utilities Groceries/Lunches/Dinners Out Transportation Insurance (Home, Vehicle, Life) Taxes Clothing Personal Entertainment Gifts & Contributions Family Education Credit Card Payments Vehicle Payments Other Creditor Payments TOTAL EXPENSES TOTAL INCOME MINUS TOTAL EXPENSES = $ 8

9 Making Smart Credit Choices Everyone s financial situation is different, and you must consider your needs and responsibilities when choosing a loan and deciding if you even should take out a loan. Look at your current bills and income, and your current and future needs. Prepare a budget before taking out any loan to determine if you will have enough money available to repay it. Shop around for the best loan, and make sure you compare the monthly payment and total cost, in addition to the interest rate and APR. Do not let anyone pressure you into making a decision, make sure you understand the terms of the loan, and read all documents before signing them and make sure that no lines are left blank. Comparison Shopping Worksheet As you shop around for the loan that best meets your needs, use the Comparison Shopping Sheet below to fill in key information. Loan A Loan B Loan C Amount BoRrowed Monthly Payment Length of loan finance Charge APR Total payments 9

10 AFSA Education Foundation 919 Eighteenth Street, NW Washington, DC Phone: Website: 10

Personal Loans 101: Understanding

Personal Loans 101: Understanding Personal Loans 101: Understanding APR Everyone needs access to affordable credit, whether it is to make a small purchase, pay for an unexpected emergency, repair their car or obtain a mortgage on their

More information

Personal Loans 101: Understanding Personal Loans

Personal Loans 101: Understanding Personal Loans Personal Loans 101: Understanding Personal Loans When it comes to borrowing money, consumers have a variety of choices, ranging from credit cards to home equity loans. Personal loans are used for various

More information

Mortgage Loans. Understand the Terms of Your Loan before You Sign. Mortgage Loans. Standard Home Equity Loans or Second Mortgages

Mortgage Loans. Understand the Terms of Your Loan before You Sign. Mortgage Loans. Standard Home Equity Loans or Second Mortgages Mortgage Loans Understand the Terms of Your Loan before You Sign This brochure can help you determine what is best for your situation, become familiar with mortgage loan terms, and learn what is involved

More information

Understanding Your credit risk

Understanding Your credit risk www.unitedfinance.com Personal Loans 101: Understanding Your credit risk AFSA Education Foundation 919 Eighteenth Street, NW Washington, DC 20006-5517 Phone: 888-400-7577 Email: personalloans101@afsaef.org

More information

Personal Loans 101: Understanding Your credit risk

Personal Loans 101: Understanding Your credit risk Personal Loans 101: Understanding Your credit risk Loans have some risk for both the borrower and the lender. The borrower takes on the responsibilities and terms of paying back the loan. The lender s

More information

Personal Loans 101: Understanding

Personal Loans 101: Understanding Personal Loans 101: Understanding Small Dollar Loans If you are looking for a small loan, you may not be sure where to turn. Most banks and credit unions do not lend small amounts of money. Payday loans

More information

Mortgage Loans. Understand the Terms of Your Loan Before You Sign...

Mortgage Loans. Understand the Terms of Your Loan Before You Sign... Mortgage Loans Understand the Terms of Your Loan Before You Sign... This brochure can help you become familiar with basic mortgage loans, determine what terms are best for your situation, and identify

More information

Credit Cards: Rules of Thumb

Credit Cards: Rules of Thumb Name: Date: Credit Cards: Rules of Thumb Rule 1: Never carry a credit card balance. When you use your credit card to purchase items, you will receive a statement at the end of each month that will need

More information

Familiarize yourself with laws that authorize and regulate vehicle dealership financing and leasing.

Familiarize yourself with laws that authorize and regulate vehicle dealership financing and leasing. W ith prices averaging more than $28,000 for a new vehicle and $15,000 for a used vehicle, most consumers need financing or leasing to acquire a vehicle. In some cases, buyers use direct lending: they

More information

Standard 7: The student will identify the procedures and analyze the responsibilities of borrowing money.

Standard 7: The student will identify the procedures and analyze the responsibilities of borrowing money. TEACHER GUIDE 7.2 BORROWING MONEY PAGE 1 Standard 7: The student will identify the procedures and analyze the responsibilities of borrowing money. It Is In Your Interest Priority Academic Student Skills

More information

Loan Lessons. The Low-Down on Loans, Interest and Keeping Your Head Above Water. Course Objectives Learn About:

Loan Lessons. The Low-Down on Loans, Interest and Keeping Your Head Above Water. Course Objectives Learn About: Loan Lessons Course Objectives Learn About: Different Types of Loans How to Qualify for a Loan Different Types of Interest The Low-Down on Loans, Interest and Keeping Your Head Above Water usbank.com/financialeducation

More information

Credit Cards & Payday Loans

Credit Cards & Payday Loans Credit Cards & Payday Loans Payday Loans: What is a Payday Loan? A Payday loan is a small loan, also known as a cash advance. These loans typically become due in 14 days - your next payday. When taking

More information

Buying with credit lets you purchase something and use it while you are still paying for it.

Buying with credit lets you purchase something and use it while you are still paying for it. 8) Credit Buying with credit lets you purchase something and use it while you are still paying for it. There are two common types of credit: Credit Cards Offered by credit card companies, department stores

More information

Loan Lessons. The Low-Down on Loans, Interest and Keeping Your Head Above Water. Course Objectives Learn About:

Loan Lessons. The Low-Down on Loans, Interest and Keeping Your Head Above Water. Course Objectives Learn About: usbank.com/student financialgenius.usbank.com Course Objectives Learn About: Different Types of Loans How to Qualify for a Loan Different Types of Interest Loan Lessons The Low-Down on Loans, Interest

More information

The Eight Money Smart for Young Adults Modules

The Eight Money Smart for Young Adults Modules The Eight Money Smart for Young Adults Modules 1 1 Module 1: Bank On It 2 2 Module 2: Check It Out 3 3 Check It Out Benefits of checking accounts Types of checking accounts Understanding banking fees Opening

More information

Welcome. 1. Agenda. 2. Ground Rules. 3. Introductions. Borrowing Basics 2

Welcome. 1. Agenda. 2. Ground Rules. 3. Introductions. Borrowing Basics 2 Borrowing Basics Welcome 1. Agenda 2. Ground Rules 3. Introductions Borrowing Basics 2 Objectives Define what credit and a loan is Distinguish between secured and unsecured loans Identify three types of

More information

Lesson 12 Take Control of Debt: Not All Loans Are the Same

Lesson 12 Take Control of Debt: Not All Loans Are the Same Lesson 12 Take Control of Debt: Not All Loans Are the Same Lesson Description This lesson examines the features of a loan with a fixed period of repayment (term loan). After distinguishing these loans

More information

Understanding Vehicle Financing

Understanding Vehicle Financing Understanding Vehicle Financing Understanding Vehicle Financing With prices averaging more than $31,000 for a new vehicle and $17,000 for a used model from a dealership, you might consider financing or

More information

Don t Become a Victim

Don t Become a Victim Don t Become a Victim Life Smarts: 1. Determine the federal laws that assist consumers from becoming victims of predatory lending. What is predatory lending? Predatory lending is the unfair, deceptive,

More information

OBJECTIVES. The BIG Idea MONEY MATTERS. How much will it cost to buy, operate, and insure a car? Paying for a Car

OBJECTIVES. The BIG Idea MONEY MATTERS. How much will it cost to buy, operate, and insure a car? Paying for a Car Paying for a Car 4 MONEY MATTERS The BIG Idea How much will it cost to buy, operate, and insure a car? AGENDA Approx. 45 minutes I. Warm Up (5 minutes) II. What Can You Spend? (15 minutes) III. Getting

More information

Responsibilities of Credit. Chapter 18

Responsibilities of Credit. Chapter 18 Responsibilities of Credit Chapter 18 Responsibilities of Consumer Credit To Yourself To Your Creditors Creditors to You Loan Offer I (Mr. Vesper) will loan you $100.00 today if you agree to pay me $105.00

More information

lesson nine cars and loans overheads

lesson nine cars and loans overheads lesson nine cars and loans overheads the cost of owning and operating a motor vehicle ownership (fixed) costs: Depreciation (based on purchase price) Interest on loan (if buying on credit) Insurance Registration

More information

Lesson Description. Texas Essential Knowledge and Skills (Target standards) National Standards (Supporting standards) PFL Terms Interest rate

Lesson Description. Texas Essential Knowledge and Skills (Target standards) National Standards (Supporting standards) PFL Terms Interest rate Lesson Description This lesson focuses on the various sources people use for borrowing money or using credit. Some people, especially those who do not know all their options, borrow money from lenders

More information

PAYDAY LOANS The Facts

PAYDAY LOANS The Facts PAYDAY LOANS The Facts ALABAMA ASSET BUILDING COALITION Prepared by the Alabama Asset Building Coalition with support from the Howard University Center on Race and Wealth November 2013 Introduction Many

More information

Credit Workshop. What I need to know about credit and lending products of financial institutions. Financial Education Supported by:

Credit Workshop. What I need to know about credit and lending products of financial institutions. Financial Education Supported by: Credit Workshop What I need to know about credit and lending products of financial institutions. Financial Education Supported by: Concept Checklist What will I learn today? [ ] What is Credit? [ ] Advantages/

More information

IMPORTANCE OF CREDIT HISTORY AND SUCCESSFUL SAVING

IMPORTANCE OF CREDIT HISTORY AND SUCCESSFUL SAVING IMPORTANCE OF CREDIT HISTORY AND SUCCESSFUL SAVING From America Saves and Experian WHAT IS A CREDIT REPORT AND SCORE? A credit score is a three digit number that measures how likely you are to repay a

More information

Borrowing 101. Resources. Are you ready to Borrow?

Borrowing 101. Resources. Are you ready to Borrow? Borrowing 101 The BDC wants your business to succeed and in turn pay the BDC back. Our programs are revolving loan funds that require loans to be repaid so that we can lend our dollars to other businesses

More information

Chapter 06. What is Consumer Credit? Chapter 6 Learning Objectives. Introduction to Consumer Credit

Chapter 06. What is Consumer Credit? Chapter 6 Learning Objectives. Introduction to Consumer Credit Chapter 06 Introduction to Consumer Credit McGraw-Hill/Irwin Copyright 2012 by The McGraw-Hill Companies, Inc. All rights reserved. 6-1 Chapter 6 Learning Objectives 1. Define consumer credit and analyze

More information

Table of Contents. Money Smart for Adults Curriculum Page 2 of 21

Table of Contents. Money Smart for Adults Curriculum Page 2 of 21 Table of Contents Checking In... 3 Pre-Test... 4 What Is Credit?... 6 Collateral... 6 Types of Loans... 7 Activity 1: Which Loan Is Best?... 8 The Cost of Credit... 9 Activity 2: Borrowing Money Responsibly...

More information

The Concept of Credit

The Concept of Credit The Concept of Credit { http://youth.macu.com } Mountain America Credit Union knows that it s never too early to start learning critical money management skills. That s why we ve put this information together

More information

Take Control of Debt Term Loans

Take Control of Debt Term Loans Lesson 12 Take Control of Debt Term Loans Lesson Description This lesson examines the features of a loan with a fixed period of repayment (term loan). Using an interactive definition, students focus on

More information

SOME IDEAS THAT MAY HELP WITH. Credit Problems and How to Get Help

SOME IDEAS THAT MAY HELP WITH. Credit Problems and How to Get Help 66308 1083 9/9/04 3:03 PM Page Cov1 SOME IDEAS THAT MAY HELP WITH Credit Problems and How to Get Help 66308 1083 9/9/04 3:03 PM Page Cov2 Table of Contents Do you have a credit problem? 1 Minor credit

More information

Money Management Planner - Financial Worksheets For Debt Relief

Money Management Planner - Financial Worksheets For Debt Relief Money Management Planner - Financial Worksheets For Debt Relief http://www.debtsteps.com These worksheets are only part of what you need to succeed with debt relief. Your commitment to manage your money,

More information

About Credit. Financial Literacy

About Credit. Financial Literacy About Credit Financial Literacy What is Credit? Credit is the ability to borrow money with a promise of future payment. Why borrow? Goals - car, appliances, furniture, etc Home Education Health Plan your

More information

Financial Literacy. Credit basics

Financial Literacy. Credit basics Literacy Credit basics 2 Contents HANDOUT 6-1 Types of credit Type of credit Lender Uses Conditions Revolving credit Credit Cards (secured and unsecured NOT prepaid) To make purchases, pay bills, make

More information

How To Cut The Cost of Credit

How To Cut The Cost of Credit Published by the NATIONAL ASSOCIATION OF CONSUMER CREDIT ADMINISTRATORS May be reproduced with appropriate credit. For more information, contact: [ ] How To Cut The Cost of Credit Distributed by: Missouri

More information

Hidden Costs of Credit (1/2)

Hidden Costs of Credit (1/2) CHAPTER 4 Activity: Small group or partner 25 MINUTES Materials: Course materials and the activity handout Objective: The purpose of this activity is for students to examine the true cost of credit. Students

More information

Welcome. 1. Agenda. 2. Ground Rules. 3. Introductions. Loan To Own 2

Welcome. 1. Agenda. 2. Ground Rules. 3. Introductions. Loan To Own 2 Loan To Own Welcome 1. Agenda 2. Ground Rules 3. Introductions Loan To Own 2 Objectives Identify various types of installment loans Identify the factors lenders use to make home loan decisions Identify

More information

2016 DollarWise Summer Youth Contest Final Quiz Study Guide

2016 DollarWise Summer Youth Contest Final Quiz Study Guide 2016 DollarWise Summer Youth Contest Final Quiz Study Guide The DollarWise Summer Youth Contest Final Exam questions are designed to test your full knowledge of the information provided in the contest.

More information

Presentation Slides. Lesson Nine. Cars and Loans 04/09

Presentation Slides. Lesson Nine. Cars and Loans 04/09 Presentation Slides $ Lesson Nine Cars and Loans 04/09 costs of owning and operating a motor vehicle ownership (fixed) costs: Depreciation (based on purchase price) Interest on loan (if buying on credit)

More information

The RBF also licenses some credit institutions that provide personal loans (for education, travel etc), business loans, mortgages and vehicle loans.

The RBF also licenses some credit institutions that provide personal loans (for education, travel etc), business loans, mortgages and vehicle loans. Welcome again to the Public Awareness column provided by the Reserve Bank of Fiji (RBF). This month s article focuses on borrowing money and managing that credit. We also provide some issues you should

More information

What is a home equity line of credit?

What is a home equity line of credit? Page 1 of 5 ESPAÑOL (Revision forthcoming) If you are in the market for credit, a home equity plan is one of several options that might be right for you. Before making a decision, however, you should weigh

More information

BORROWER BEWARE: The High Cost of Payday and Auto Title Lenders, Pawnbrokers, and Rent-To-Own Stores

BORROWER BEWARE: The High Cost of Payday and Auto Title Lenders, Pawnbrokers, and Rent-To-Own Stores FACTS FOR OLDER CONSUMERS National Consumer Law Center BORROWER BEWARE: The High Cost of Payday and Auto Title Lenders, Pawnbrokers, and Rent-To-Own Stores What Is A Loan? A loan is borrowed money that

More information

The Danger of Debt: Avoiding Financial Pitfalls

The Danger of Debt: Avoiding Financial Pitfalls The Danger of Debt: Avoiding Financial Pitfalls LESSON 15: TEACHERS GUIDE When teens borrow money from a friend or relative to buy the latest gadget, the thought of returning the payment often comes second

More information

LINX EDUCATIONAL INSTRUCTOR S GUIDE

LINX EDUCATIONAL INSTRUCTOR S GUIDE EXTRA CREDIT: UNDERSTANDING THE DO S & DON TS OF USING CREDIT TAKING CHARGE OF CREDIT: 10 TIPS TO CREDIT DISCIPLINE Use the following suggestions as guidelines to self-discipline to keep your credit in

More information

Home Equity Loans and Lines of Credit

Home Equity Loans and Lines of Credit Delaware County Bank P.O. Box 1001 Lewis Center, OH 43035 740-657-7000 inforequest@dcb-t.com Home Equity Loans and Lines of Credit Page 1 of 5, see disclaimer on final page Home Equity Loans and Lines

More information

What is a home equity line of credit?

What is a home equity line of credit? More and more lenders are offering home equity lines of credit. By using the equity in your home, you may qualify for a sizable amount of credit, available for use when and how you please, at an interest

More information

Federal Reserve Bank of Philadelphia

Federal Reserve Bank of Philadelphia Federal Reserve Bank of Philadelphia 1 Credit is a valuable commodity. Having the ability to borrow funds enables us to obtain things we would otherwise have to save years to afford: homes, cars, a college

More information

Debt Management Options

Debt Management Options Get and Stay on Track Debt Management Options Where should you start? The first step to determine which debt management tool is best for you is to review your financial situation and your financial goals.

More information

Effective Strategies for Personal Money Management

Effective Strategies for Personal Money Management Effective Strategies for Personal Money Management The key to successful money management is developing and following a personal financial plan. Research has shown that people with a financial plan tend

More information

After Bankruptcy: What You Need to Know

After Bankruptcy: What You Need to Know After Bankruptcy: What You Need to Know The Path to Creditworthiness Bankruptcy offers some resolution to your financial worries. However, it also carries negative consequences and major responsibilities

More information

KNOW YOUR MORTGAGE RISKS & RESPONSIBILITIES

KNOW YOUR MORTGAGE RISKS & RESPONSIBILITIES KNOW YOUR MORTGAGE RISKS & RESPONSIBILITIES Getting a mortgage is often the largest financial commitment Canadians make. Mortgages can come with many benefits. Mortgages will help you own your own home.

More information

GET CREDITWISE SM SM

GET CREDITWISE SM SM GET CREDITWISE SM SM Table Of Contents October, 2006 Credit Matters 1 An introduction Establishing Credit 3 Begin building a solid financial base Using Credit Wisely 5 Narrowing your options Monitoring

More information

Credit 100 understanding credit

Credit 100 understanding credit Credit 100 understanding credit An investment in knowledge always pays the best interest. Franklin D. Roosevelt Credit 100 1 Credit can open doors to buying a home or a car. But it can also lead to significant

More information

Mortgage Fraud. Table of Contents. Home Equity Scams Choosing a Loan Home Equity Dos Home Equity Don ts

Mortgage Fraud. Table of Contents. Home Equity Scams Choosing a Loan Home Equity Dos Home Equity Don ts Mortgage Fraud Table of Contents Home Equity Scams Choosing a Loan Home Equity Dos Home Equity Don ts Reverse Mortgages Home Loan Law HOEPA Prevents For more information on Mortgage Fraud visit: You could

More information

What is a home equity line of credit?

What is a home equity line of credit? More and more lenders are offering home equity lines of credit. By using the equity in your home, you may qualify for a sizable amount of credit, available for use when and how you please, at an interest

More information

HOME EQUITY LINE OF CREDIT

HOME EQUITY LINE OF CREDIT Creditor: STANFORD FEDERAL CREDIT UNION HOME EQUITY LINE OF CREDIT This disclosure contains important information about our Home Equity Line of Credit. You should read it carefully and keep a copy for

More information

WHAT YOU SHOULD KNOW ABOUT HOME EQUITY LINES OF CREDIT

WHAT YOU SHOULD KNOW ABOUT HOME EQUITY LINES OF CREDIT WHAT YOU SHOULD KNOW ABOUT HOME EQUITY LINES OF CREDIT More and more lenders are offering home equity lines of credit. By using the equity in your home, you may qualify for a sizable amount of credit,

More information

Lesson 8: Credit Cards Types of Credit Card Accounts

Lesson 8: Credit Cards Types of Credit Card Accounts 1 Lesson 8: Credit Cards Types of Credit Card Accounts 1. Bank Card Examples: Visa, MasterCard, Discover, American Express Revolving Credit can pay all or some of the bill with the remaining balance put

More information

lesson eight credit cards overheads

lesson eight credit cards overheads lesson eight credit cards overheads shopping for a credit card costs: Annual Percentage Rate (APR) or Finance (Interest) Charges Grace period Annual fees Transaction fees Balancing computation method for

More information

The Federal Reserve Board

The Federal Reserve Board The Federal Reserve Board What you should know about Home Equity Lines of Credit Board of Governors of the Federal Reserve System What You Should Know about Home Equity Lines of Credit 1 More and more

More information

Lesson 13 Take Control of Debt: Become a Savvy Borrower

Lesson 13 Take Control of Debt: Become a Savvy Borrower Lesson 13 Take Control of Debt: Become a Savvy Borrower Lesson Description After reviewing the difference between term loans and revolving credit, students analyze a fictitious character s use of credit

More information

Lesson 2: Savings and Financial Institution Knowledge Making the Most of Your Money

Lesson 2: Savings and Financial Institution Knowledge Making the Most of Your Money Lesson 2: Savings and Financial Institution Knowledge Making the Most of Your Money All the materials and information included in this presentation is provided for educational and illustrative purposes

More information

Using Credit to Your Advantage Credit Cards and Loans Participant Guide

Using Credit to Your Advantage Credit Cards and Loans Participant Guide Hands on Banking Using Credit to Your Advantage The Hands on Banking program is a free public service provided by Wells Fargo. You may also access the program anytime at www.handsonbanking.org & www.elfuturoentusmanos.org

More information

Using Credit to Your Advantage

Using Credit to Your Advantage Hands on Banking Using Credit to Your Advantage Credit Reports, Credit Scores and Dealing with Debt The Hands on Banking program is a free public service provided by Wells Fargo. You may also access the

More information

3. Develop a spending plan for your retirement. Having a plan for your money and limiting expenses in retirement is important.

3. Develop a spending plan for your retirement. Having a plan for your money and limiting expenses in retirement is important. For Kupuna: 15 Quick Tips for Protecting Your Finances As many consumers get older, they often face issues such as how to maintain their lifestyle and pay for medical expenses on a fixed income for years

More information

Student Activities. Lesson Three. Credit Cards 07/13

Student Activities. Lesson Three. Credit Cards 07/13 Student Activities $ Lesson Three Credit Cards 07/13 shopping for credit Credit card costs and features can vary greatly. This exercise will give you a chance to shop for and compare the costs and features

More information

BANKING FOR SUCCESS PRE-CLASS YOUR NAME: DATE:

BANKING FOR SUCCESS PRE-CLASS YOUR NAME: DATE: BANKING FOR SUCCESS PRE-CLASS YOUR NAME: DATE: Please answer the following questions for us it will help us learn more about the problems our participants face so that we can make the classes better. Please

More information

Making a Budget and Sticking to It

Making a Budget and Sticking to It Budgeting and money management Making a Budget and Sticking to It Do you cringe when you hear the word budget? Sure, a budget involves a bit of work on your part, but the payoff is financial discipline

More information

Presentation Slides. Lesson Eight. Credit Cards 04/09

Presentation Slides. Lesson Eight. Credit Cards 04/09 Presentation Slides $ Lesson Eight Credit Cards 04/09 applying for a credit card costs: Annual Percentage Rate (APR) Grace period Annual fees Transaction fees Balancing computation method for the finance

More information

The following is an article from a Marlboro, Massachusetts newspaper.

The following is an article from a Marlboro, Massachusetts newspaper. 319 CHAPTER 4 Personal Finance The following is an article from a Marlboro, Massachusetts newspaper. NEWSPAPER ARTICLE 4.1: LET S TEACH FINANCIAL LITERACY STEPHEN LEDUC WED JAN 16, 2008 Boston - Last week

More information

Fifth Third Home Buying Guide. A Guide to Residential Home Buying.

Fifth Third Home Buying Guide. A Guide to Residential Home Buying. Fifth Third Home Buying Guide A Guide to Residential Home Buying. Important Contacts and Numbers. Use this page to record important information as you move through the homebuying process. Realtor/Builder

More information

CREDIT BASICS. Advanced Level

CREDIT BASICS. Advanced Level CREDIT BASICS Advanced Level YOUR PRESENT SELF IMPACTS You receive goods or services today YOUR FUTURE SELF With the promise to pay back the determined amount of money (usually in small increments plus

More information

Credit Cards. and Your Credit Score

Credit Cards. and Your Credit Score Credit Cards and Your Credit Score Introduction Credit Cards and Your Credit Score Learning Objectives Lesson 1 Selecting a Credit Card: The Devil s in the Detail Identify and explain the costs and terms

More information

My Credit Report Card

My Credit Report Card Lesson 1: My Credit Report Card Lesson Overview: This lesson will provide students with an overview of elements that are included in their credit report. Students will examine how various behaviors affect

More information

Agenda. 1. Assessing Your Situation A. 3 types of consumers B. Net Worth C. Net Cash Flow

Agenda. 1. Assessing Your Situation A. 3 types of consumers B. Net Worth C. Net Cash Flow 1 Agenda 1. Assessing Your Situation A. 3 types of consumers B. Net Worth C. Net Cash Flow 2. Revolving Credit A. Credit vs. Charge vs. Debit Cards B. Tips on Revolving Credit C. Home Equity Line Credit

More information

How much will a/an. loan cost? AUTO TITLE LOAN SINGLE PAYMENT. Thirty Day. Ask Yourself... How Long Could It Take to Repay a Loan?

How much will a/an. loan cost? AUTO TITLE LOAN SINGLE PAYMENT. Thirty Day. Ask Yourself... How Long Could It Take to Repay a Loan? AUTO TITLE LOAN SINGLE PAYMENT You Can Lose Your Car If you miss a payment or make a late payment, your car can be repossessed. A er reviewing the terms of the loan, you are not required to choose this

More information

How much will a two-week, $200 payday loan cost?

How much will a two-week, $200 payday loan cost? PAYDAY LOAN SINGLE PAYMENT After reviewing the terms of the loan, you are not required to choose this loan, and may consider other borrowing options, including those shown on Page 2 of this document. Borrowed

More information

When Finances Go Wrong - Debt

When Finances Go Wrong - Debt When Finances Go Wrong - Debt Very few people now have no debt at all after all a mobile phone contract, or your rent/mortgage are both debts. It becomes an issue for people when they cannot meet the payments

More information

Financial Literacy in Guidance and Career Education Career Studies (GLC2O) Connections to Financial Literacy

Financial Literacy in Guidance and Career Education Career Studies (GLC2O) Connections to Financial Literacy LESSON PLAN Financial Literacy in Guidance and Career Education Career Studies (GLC2O) Connections to Financial Literacy In small groups, students work on a saving and spending plan and develop balanced

More information

Keeping Score: Why Credit Matters LESSON 1

Keeping Score: Why Credit Matters LESSON 1 Keeping Score: Why Credit Matters LESSON 1 Keeping Score: Why Credit Matters LESSON 1: TEACHERS GUIDE In the middle of a football grandfinal, keeping score is the norm. But when it comes to life, many

More information

Credit: The Good and the Bad

Credit: The Good and the Bad Managing Your Credit Effectively Credit can be a valuable addition to your financial toolbox if you use it carefully and sensibly. Credit means someone is willing to loan you money called Principal in

More information

Homeownership. Your First Steps toward. Getting Started. Know Your Finances. Which Mortgage Is Right for You?

Homeownership. Your First Steps toward. Getting Started. Know Your Finances. Which Mortgage Is Right for You? Your First Steps toward Homeownership Identify the type of mortgage that meets your specific financial needs Getting Started Many people don t consider buying a home because they re afraid they can t afford

More information

LESSON 1 -- GETTING OUT OF DEBT

LESSON 1 -- GETTING OUT OF DEBT LESSON 1 -- GETTING OUT OF DEBT LESSON DESCRIPTION AND BACKGROUND This lesson uses the Better Money Habits video Steps to Help You Get Out of Debt (www.bettermoneyhabits.com) to explain the concept of

More information

Make a Smart Start Toward Financial Success SUNY ORANGE STUDENTS

Make a Smart Start Toward Financial Success SUNY ORANGE STUDENTS Make a Smart Start Toward Financial Success SUNY ORANGE STUDENTS A College Education is a Smart Investment High School Graduate $25,000 Some College $30,000 Associate s Degree $32,000 Bachelor s Degree

More information

How to Establish, Use, and Protect Your Credit

How to Establish, Use, and Protect Your Credit How to Establish, Use, and Protect Your Credit How to Establish, Use, and Protect Your Credit What you need to know Good credit is valuable. Having the ability to borrow funds allows us to buy things we

More information

If yes, complete the savings plan using the worksheet that follows. To complete this worksheet, you will need to know:

If yes, complete the savings plan using the worksheet that follows. To complete this worksheet, you will need to know: Savings plan This tool can help you make a plan to save money for: Your goals Expenses Unexpected expenses and emergencies There are two steps to making a savings plan. First, answer the set of questions

More information

If you have not established credit, several options can help you obtain a credit card:

If you have not established credit, several options can help you obtain a credit card: Credit Cards The Basics. Do you understand what credit is and how to use it wisely? Like many of today's teenagers and college students, you appreciate the convenience and relative safety of credit cards.

More information

The Good Credit Game Alignment with Financial Education National Standards

The Good Credit Game Alignment with Financial Education National Standards The Good Credit Game Alignment with Financial Education National Standards There are a number of national standards for teaching personal finance and financial literacy. Many of the learning objectives

More information

Mortgage Fraud Home Equity Scams Choosing a Loan

Mortgage Fraud Home Equity Scams Choosing a Loan Mortgage Fraud You could lose your home and your money if you borrow from unscrupulous lenders who offer you a high-cost loan based on the equity you have in your home. Certain lenders target homeowners

More information

Refinancing. Refinancing WISCONSIN HOMEOWNERSHIP PRESERVATION EDUCATION. Section Overview

Refinancing. Refinancing WISCONSIN HOMEOWNERSHIP PRESERVATION EDUCATION. Section Overview People refinance their homes to take advantage of lower interest rates or to decrease their monthly payment. Sometimes it is done to create extra money for purchases (like a car) or for debt repayment.

More information

Welcome! Please Sign in and Fill out the forms: AARP Participant Agreement Student Information/Pre-Assessment

Welcome! Please Sign in and Fill out the forms: AARP Participant Agreement Student Information/Pre-Assessment Welcome! Please Sign in and Fill out the forms: AARP Participant Agreement Student Information/Pre-Assessment 1 Sponsored by and developed in collaboration with AARP FOUNDATION FINANCES 50+ TAKING CONTROL

More information

Teacher Resource Guide

Teacher Resource Guide Teacher Resource Guide EverFi - Financial Literacy EverFi - Financial Literacy teaches, assesses and certifies students in critical financial concepts through the latest online, interactive curriculum

More information

What We Need to Know About. Credit Management & Credit Repair for Entrepreneurs

What We Need to Know About. Credit Management & Credit Repair for Entrepreneurs What We Need to Know About. Credit Management & Credit Repair for Entrepreneurs What is Credit? When someone lends you money, and you pay them back with interest, they have extended you credit. Credit

More information

Materials. Lesson Objectives

Materials. Lesson Objectives 70 Materials 1. Marker or Chalk 2. Chalkboard or Flip Chart 3. Blank piece of white paper 4. Credit Card Vocabulary Sheet 5. Credit Report Answer Key 6. Student Materials Packets Outline 1. KWL 2. Review

More information

Student Activities. Lesson Eight. Cars And Loans 04/09

Student Activities. Lesson Eight. Cars And Loans 04/09 Student Activities $ Lesson Eight Cars And Loans 04/09 the operating costs of a car Model year Make, size, model Fixed costs Depreciation: Purchase price $ divided by estimated life of years $ Annual insurance

More information

Understanding Credit. The Three C s of Credit. What is a Credit Bureau?

Understanding Credit. The Three C s of Credit. What is a Credit Bureau? Understanding Credit By definition, the word credit has to do with trust. This is why credit impacts so many financial issues in our lives including the extension of a loan or credit card, how high an

More information

Advantages and Disadvantages of Using Credit

Advantages and Disadvantages of Using Credit 1 Lesson 7: About Credit Why Get Credit? To establish a credit history. Advantages and Disadvantages of Using Credit 1. Advantages Able to buy needed items now. Don t have to carry cash. Creates a record

More information

PERSONAL LOANS 101: UNDERSTANDING PAYMENT PROTECTION INSURANCE

PERSONAL LOANS 101: UNDERSTANDING PAYMENT PROTECTION INSURANCE PERSONAL LOANS 101: UNDERSTANDING PAYMENT PROTECTION INSURANCE Payment protection insurance can be a valuable tool in helping protect your credit and your loved ones from unexpected life events. If something

More information

Personal Loans 101: Understanding

Personal Loans 101: Understanding Personal Loans 101: Understanding PAYMENT PROTECTION INSURANCE Payment protection insurance can be a valuable tool in helping protect your credit and your loved ones from unexpected life events. If something

More information