CHAPTER 8 Preserving Your Credit 8 1 Identifying

CHAPTER 8 Preserving Your Credit 8 -1 Identifying Financial Issues 8 -2 Long-Term Debt Repayment 8 -3 Credit Management © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

8 -1 Identifying Financial Issues Learning Objectives 8 -1. 1 Discuss living arrangements and financial issues with other members of your household. 8 -1. 2 Describe contractual rights and responsibilities for landlords and tenants. © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Slide 2

What Are Shared Responsibilities? ● Roommate • A person with whom you share living space, living expenses, and other responsibilities ● Shared responsibility • Two or more people who each agree to bear a portion of an obligation ● Living Arrangements • Living habits: Your daily routine, or the way you choose to live your life © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Slide 3

What Are Shared Responsibilities? (continued) ● Financial Issues • Security deposit: A refundable amount paid to cover damages to property caused by a tenant • Logistics: The act of making a plan and carrying it out to ensure that an event takes place © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Slide 4

Group Budget © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Slide 5

What Are Contractual Rights and Duties? ● Contract • A legally binding agreement that specifies the rights and duties of each party to the agreement ● Consideration • Something of value exchanged for something else of value © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Slide 6

What Are Contractual Rights and Duties? (continued) ● Lease • A written agreement that allows a tenant to use property for a set period of time at a set rent payment ● Rental agreement • A written contract that allows you to leave any time as long as you give the required notice © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Slide 7

Lease © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Slide 8

What Are Contractual Rights and Duties? (continued) ● Tenant Rights and Responsibilities • Eviction: The legal process of removing a tenant from rental property ● Landlord Rights and Responsibilities • Property manager: An off-site manager hired to take care of rental property © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Slide 9

8 -2 Long-Term Debt Repayment Learning Objectives 8 -2. 1 Discuss long-term debt options for the purchase of high-priced items. 8 -2. 2 Explain the purpose of a debt repayment plan. © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Slide 10

What Are Long-Term Debt Options? ● Buying a Car • Down payment: A cash deposit toward the purchase price that is paid up front • Trade-in: Something of value applied toward the down payment of a new purchase • Financing Options • Preapproved loan: A loan for which a maximum amount is established and approved in advance © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Slide 11

What Are Long-Term Debt Options? (continued) ● Buying a Car (continued) • Leasing • Debt Repayment • Refinancing: Paying off an existing loan with a new loan that usually has better terms ● Buying a House • Financing Options • Mortgage: A loan used to purchase real estate Slide 12 © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

What Are Long-Term Debt Options? (continued) ● Buying a House (continued) • Debt Repayment • Renting to Own • Rent-to-own agreement: A contract in which a portion of the renter’s monthly payment is applied toward the purchase price of the rented item © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Slide 13

What Is a Debt Repayment Plan? ● Debt repayment plan • A strategy for paying off debt in a way that reduces the total interest paid ● Student Loan Debt ● Mortgage Debt • Balloon payment: A large lump-sum payment that must be paid at a set time ● Prepayment penalty • A fee charged if you repay a loan before the agreed-upon time © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Slide 14

Paying Off Debt Early © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Slide 15

Prepayment Penalty © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Slide 16

8 -3 Credit Management Learning Objectives 8 -3. 1 List ways that you can effectively manage your use of credit. 8 -3. 2 Explain how to avoid credit costs and risky loan practices. © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Slide 17

How Can You Manage Credit Use? ● Credit management • Establishing and following an individual plan for using credit wisely ● Consider the Economy ● Study Credit Offers © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Slide 18

How Can You Manage Credit Use? (continued) ● Manage and Assess Your Debt Load • 20/10 Rule: A plan to limit the use of credit to no more than 20 percent of your yearly take-home pay, with payments of no more than 10 percent of monthly takehome pay © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Slide 19

How Can You Reduce and Avoid Credit Costs? ● Avoid Unnecessary Credit Costs • Unused credit: The remaining credit available to you on current accounts ● Avoid Risky Loan Practices • Predatory lending: Unfair, deceptive, and fraudulent loan practices • Loan shark: A person who offers illegal loans at very high interest rates and often uses intimidation to enforce repayment © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Slide 20

How Can You Reduce and Avoid Credit Costs? (continued) ● Avoid Risky Loan Practices (continued) • Easy access credit: Type of credit that can be obtained quickly and easily but that often comes with high or hidden costs • Title loan: A short-term loan with a high interest rate that uses the title on your vehicle as collateral © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Slide 21

How Can You Reduce and Avoid Credit Costs? (continued) ● Avoid Risky Loan Practices (continued) • Equity stripping: The unethical practice of extending a loan to a distressed homeowner who cannot afford the loan payments, resulting in the lender taking possession of the home • Payday loan: A cash advance from your next paycheck © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Slide 22

How Can You Reduce and Avoid Credit Costs? (continued) ● Avoid Risky Loan Practices (continued) • Advance-fee loan: A type of loan that includes a large fee up front • Rent-to-Own Agreements © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Slide 23

Payday Loan © 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Slide 24