Title: Instructor Introduction
Course: Personal Finance - Using Credit - Sample Syllabus - for Canvas Upload > Section: Personal Finance - Using Credit - Sample Syllabus

Standard and Benchmarks

National Standards for Financial Literacy

Standard 4: Using Credit

Credit allows people to purchase goods and services that they can use today and pay for those goods and services in the future with interest. People choose among different credit options that have different costs. Lenders approve or deny applications for loans based on an evaluation of the borrower’s past credit history and expected ability to pay in the future. Higher-risk borrowers are charged higher interest rates; lower-risk borrowers are charged lower interest rates.

Grade 12 Benchmarks

1. Consumers can compare the cost of credit using the annual percentage rate (APR), initial fees charged, and fees charged for late payment or missed payments.

2. Banks and financial institutions sometimes compete by offering credit at low introductory rates, which increase after a set period of time or when the borrower misses a payment or makes a late payment.

3. Loans can be unsecured or secured with collateral. Collateral is a piece of property that can be sold by the lender to recover all or part of a loan if the borrower fails to repay. Because secured loans are viewed as having less risk, lenders charge a lower interest rate than they charge for unsecured loans.

4. People often make a cash payment to the seller of a good—called a down payment—in order to reduce the amount they need to borrow. Lenders may consider loans made with a down payment to have less risk because the down payment gives the borrower some equity of ownership right away. As a result, these loans may carry a lower interest rate.

5. Lenders make credit decisions based in part on consumer payment history. Credit bureaus record borrowers’ credit and payment histories and provide that information to lenders in credit reports.

6. Lenders can pay to receive a borrower’s credit score from a credit bureau. A credit score is a number based on information in a credit report and assesses a person’s credit risk.

7. In addition to assessing a person’s credit risk, credit reports and scores may be requested and used by employers in hiring decisions, landlords in deciding whether to rent apartments, and insurance companies in charging premiums.

8. Failure to repay a loan has significant consequences for borrowers such as negative entries on their credit report, repossession of property (collateral), garnishment of wages, and the inability to obtain loans in the future.

9. Consumers who have difficulty repaying debt can seek assistance through credit counseling services and by negotiating directly with creditors.

Using Credit - Talking Points

Description - Credit allows people to purchase and use goods and services today but pay for them in the future at an additional cost. Students will learn about the criteria used by lenders to determine creditworthiness. They will weigh the costs and benefits of choosing to use different types of credit and about the impact of interest on the overall cost of using credit. They will also learn about the importance of meeting credit obligations and about the potential for financial trouble from the misuse of credit.

Talking Points
1. People receive credit when they obtain the use of someone else’s money to purchase goods or services.
2. People who obtain credit are given a loan of money in exchange for their promise to repay the money later plus additional money called  interest.
3. Common types of credit include mortgage loans, car loans, student loans, personal loans, and credit cards.
4. Interest is the price borrowers pay for using someone else’s money and the price lenders receive for letting someone else use their money.
5. Using credit has both benefits and costs.
6. Benefits of credit include the following:

- a. acquiring assets to increase your net worth over time,
- b. the ability to finance emergency purchases,
- c. payment convenience (purchasing goods and services now as opposed to later),
- d. a lower cost than using your own invested funds, and
- e. the ability to take advantage of a lower price for some good or service (to get a good deal).

7. Costs of credit include the following:

- a. creating a liability that lowers your net worth,
- b. paying interest and fees,
- c. purchasing fewer goods and services in the future,
- d. less available credit for emergencies, and
- e. increased exposure to identify theft.

8. Credit providers consider the three Cs in deciding to whom they will extend credit:

- a. capacity—the ability of the creditor to repay the loan,
- b. character—how honest and reliable the creditor is in paying debts, and
- c. collateral—assets the creditor has that could be sold later to pay off the loan.

9. People’s credit scores are a measure of their character because credit scores are based largely on their payment history—for example, whether or not they

- a. pay bills on time,
- b. pay bills in full,
- c. stay below their credit limits, or
- d. have declared bankruptcy.

10. When considering whether credit or a loan is desirable, it is important for people to consider the likely impact of the choice on their personal net worth over time.