4 WAYS TO PAY
There are 4 main ways to pay for services and items. You can pay using CREDIT, DEBIT, CASH, or CHECKS.
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Debit, Cash, and Checks are all similar because it is money that is made, not borrowed.
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Open-End Credit is credit that does not stop-or never stops. Credit Cards are an example of open-end credits. If you use a credit card to pay for food or personal needs; you'll continue to pay for these items/services. Therefore, credit cards are open-end. They won't stop.
CREDIT VOCAB; This list of vocabulary words will hopefully help you learn some terms on credit.
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Collateral is a property or other asset that a borrower offers as a way for a lender to secure the loan. (http://www.investopedia.com/terms/c/collateral.asp)
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If you do not pay an installment for a house, the creditor (lender) has the right to take the house from the borrower.
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This makes the credit- SECURED. When collateral is involved; it is consider a SECURED CREDIT.
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General IDEA;
OPPORTUNITY COST. Opportunity Cost is the loss of potential gain from other alternatives when one alternative is chosen. (https://goo.gl/to63A0)
Let's say you have a certain amount of money you can spend. You have two options: Eat out or Go to the Movies You cannot do both. Which one will you choose? If you choose the Movies, you can't Eat out. If you choose Eating out, you can't go to the Movies. When you lose an opportunity to another; that is called Opportunity Cost.
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The Three C's of Credit
CHARACTERCredit History.
Character in Credit is how well a person has dealt with credit in the past. How often you paid, if you paid on the deadlines, if you've had a good credit score. etc. |
CAPACITYHow Much Can You Handle?
Capacity in Credit is how much debt can the person (or borrower) handle. Will they be able to pay in time? Depending on their occupation, income, and character; Banks (companies) can choose to reject or accept people to use their Credit. |
CAPITALWhat Do You Have? Capital in Credit is what are the items or pieces that the borrower can sell in order to make up their Debt. Do they have artwork, furniture, a house, etc. Companies look for anything that is valuable and that can sell.
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CREDIT SCORES: What is it?
A Credit Score is a numerical rating, based on credit report information, that represents a person's level of credit worthiness. The official credit score range is 300-850. If your credit is in the range of 700 or above; the credit score is great; it's well. Anything from 600-700 isn't horrible, but it's not the best.
Having a good credit score will allow you to have more opportunities with credit. |
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> HOW CREDIT CARD COMPANIES MAKE MONEY.
How do they do it? Well, the answer is quite simple. The companies make money off of fees (for people who are late to pay bills) BUT the way the make MOST of their money is from the companies that accept their CARDS. Companies must pay credit card companies a small about of money for every credit card swiped. That adds up to a lot. Billions.
Not sure if you know how to use a Credit Card?
Use this simple guide to help! |
Student Loans, or Higher Education Loans are loans that students use to attend colleges or universities. (closed-end)
House loans are typically 30 years long and Auto loans are 5 years long usually.
Private Loans are loans that are between family or friends. Although, not paying off the loans can result in ruining relationships.
Acceleration Clauses give the seller the right to declare the whole balance due if the buyer misses even one installment payment. These usually are found in mortgage or real estate loans. (https://goo.gl/gk4oxj)
Add-on Clauses allow additional purchases to be added to an installment contract, with earlier purchases used as security for later ones.
Add-on Clauses allow additional purchases to be added to an installment contract, with earlier purchases used as security for later ones.
DEBT
If a company cannot reach a borrower that has not paid, after mutiple attempts, the company can send the borrower's information to a COLLECTION AGENCY.
Collection Agencies are hired to track down borrowers and collect the money (bills) that needs to be paid. Although they may send emails or make multiple phone calls to remind the borrower; there is a fine line between Harassment and Collecting.
Collection Agencies are hired to track down borrowers and collect the money (bills) that needs to be paid. Although they may send emails or make multiple phone calls to remind the borrower; there is a fine line between Harassment and Collecting.
Although, if collection agency has to collect bills from the borrower, the borrower's credit score will be damaged.
Debt Consolidation Loans; these are loans that consolidate your loans.
They combine a collection of loans based off of interest rates into one loan with one set interest rate.
They combine a collection of loans based off of interest rates into one loan with one set interest rate.
BANKRUPTCY
BANKRUPT(CY). This is when someone declares by law that they are unable to pay anything due to debt. (https://goo.gl/7aWz5E)
In other words, it's when you go broke.
Whenever someone declares they're bankrupt, the companies that were supposed to be paid get nothing; this is why most companies try to work with borrowers because a small amount of money is better than NOTHING.
In other words, it's when you go broke.
Whenever someone declares they're bankrupt, the companies that were supposed to be paid get nothing; this is why most companies try to work with borrowers because a small amount of money is better than NOTHING.