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3.1 Credit Basics Due (10/7/22 SoC)

Last updated 12 months ago
23 questions
Note from the author:

In this lesson, you will learn to:

  • Correctly use fundamental vocabulary related to credit and lending
  • Explain how loan amortization and payments work
  • Understand how principal, interest rate, and term are critical components to evaluating credit options

In this lesson, you will learn to:

  • Correctly use fundamental vocabulary related to credit and lending
  • Explain how loan amortization and payments work
  • Understand how principal, interest rate, and term are critical components to evaluating credit options
Required
10

Have you ever borrowed from or lent money to someone? (UCS)

Required
10

Who did the loan involve?

Required
10

Did it work out the way you anticipated? Were both people happy at the end? (UCS)

Banking Explained – Money and Credit

Publisher: In a Nutshell - Kurzgesagt
Required
10

What is the relationship between people who save money in banks and people who borrow money from banks? (UCS)

Required
10

How does the bank make a profit? (UCS)

What is Credit? Loans, Mortgages, and Overdrafts explained

Watch this video and answer the questions on the right.
Required
15
In your own words define:

credit: _______

principal: _______

interest: _______

term: _______


(UCS)
Required
10

What are the main advantages to a secured vs. unsecured loan? (UCS)

Required
10

What factors determine interest rates? (UCS)

Required
10

What is a danger of taking a variable rate loan? (UCS)

Understanding How Loan Payments Work

When loan payments are amortized, the total amount you owe every month remains constant
Required
10

Why does the amount of INTEREST you owe decrease every month? (UCS)

Day 2

ANALYZE: Understanding Amortization



Part I: Categorize Different Types of Credit

For each TYPE OF CREDIT listed in the first column, you’ll categorize it in the remaining three columns, using the following descriptions:


If you’re unsure where a type of credit belongs, you can use these links as a resource:
  • Types of Consumer Credit & Loans - Debt.org
  • The Difference Between Secured and Unsecured Debts - About Money
  • What Is the Difference Between Fixed- and Variable-Rate Financing? - CFPB
If you can’t find the answer using the links above, you can do your own internet search to help you complete the work.
Required
9
Classify each Type of Credit. For each TYPE OF CREDIT listed in the first column, you’ll categorize it using the corresponding abbreviations.

TYPE OF CREDIT:


Auto Loan
Installment Loans vs Revolving Credit__________

Secured vs Unsecured Debt __________

Variable vs Fixed Rate __________
Required
9
Classify each Type of Credit. For each TYPE OF CREDIT listed in the first column, you’ll categorize it using the corresponding abbreviations.

TYPE OF CREDIT:


Credit Card
Installment Loans vs Revolving Credit__________

Secured vs Unsecured Debt __________

Variable vs Fixed Rate __________
Required
9
Classify each Type of Credit. For each TYPE OF CREDIT listed in the first column, you’ll categorize it using the corresponding abbreviations.

TYPE OF CREDIT:


Mortgage
Installment Loans vs Revolving Credit__________

Secured vs Unsecured Debt __________

Variable vs Fixed Rate __________
Required
9
Classify each Type of Credit. For each TYPE OF CREDIT listed in the first column, you’ll categorize it using the corresponding abbreviations.

TYPE OF CREDIT:


Payday Loan
Installment Loans vs Revolving Credit__________

Secured vs Unsecured Debt __________

Variable vs Fixed Rate __________
Required
9
Classify each Type of Credit. For each TYPE OF CREDIT listed in the first column, you’ll categorize it using the corresponding abbreviations.

TYPE OF CREDIT:


Personal loan (from a bank)
Installment Loans vs Revolving Credit__________

Secured vs Unsecured Debt __________

Variable vs Fixed Rate __________
Required
9
Classify each Type of Credit. For each TYPE OF CREDIT listed in the first column, you’ll categorize it using the corresponding abbreviations.

TYPE OF CREDIT:


Small business loan (from a bank)
Installment Loans vs Revolving Credit__________

Secured vs Unsecured Debt __________

Variable vs Fixed Rate __________
Required
9
Classify each Type of Credit. For each TYPE OF CREDIT listed in the first column, you’ll categorize it using the corresponding abbreviations.

TYPE OF CREDIT:


Student loan (Federal)
Installment Loans vs Revolving Credit__________

Secured vs Unsecured Debt __________

Variable vs Fixed Rate __________

Part II: Reflection

Required
10

Why do people sometimes use credit to pay for items instead of just using cash?

Required
10

When applying for credit, is it preferable to receive a low interest rate or a high interest rate?

Required
10

Sometimes, lenders allow or require a downpayment before they extend you the loan. What would be the advantage to the lender? What would be the advantage to the borrower?

Exit Ticket

Required
3

What makes a loan be categorized as secured?

Required
3

Which of the following is usually a secured debt?

Required
3

Which of the following is a TRUE statement describing the benefits of an installment loan?