UNIT

The student will be able to

IDENTIFY the procedures and
ANALYZE the responsibilities of
borrowing money.

oMore likely to repay

your debts

oLess likely to repay

your debts

credit score =

interest on a loan

FOR EXAMPLE:
If you borrowed $200,000 for 30 years,
you could save over $9,000 in interest if you
increased your credit score from 670 to 690.

Choose your Facebook friends wisely; they

could help you get approved -- or rejected
-- for a loan.
A handful of tech startups are using social
data to determine the risk of lending to
people who have a difficult time
accessing credit. Traditional lenders rely
heavily on credit scores like FICO, which
look at payments history. They typically
steer clear of the millions of people who
don't have credit scores.

But some financial lending companies

have found that social connections
can be a good indicator of a person's
creditworthiness.
One such company, Lenddo, determines
if you're friends on Facebook with
someone who was late paying back a
loan to Lenddo. If so, that's bad news
for you. It's even worse news if the
delinquent friend is someone you
frequently interact with.

REPAYMENT
SCHEDULE

APPLY

CHECK
CREDIT
SCORE

INTEREST
RATE
APPROVAL

DEBT TO INCOME RATIO

35%

LOAN TO VALUE
85%

$20,000 at
$20,000 at
5% interest 8% interest
for 5 years? for 5 years?

$20,000 at 5% $20,000 at 5%
interest for
interest for 5
10 years?
years?

TARGET POOR CREDIT SCORE

RAPID TAX RETURN
PAYDAY LOANS
TITLE LOANS

http://www.learnvest.com/knowledge-center/should-you-get-a-rapid-refund/

Tax preparers often offer what they call instant refunds or

rapid refunds. That is when they give you the
equivalent of your refund now, instead of having you wait
for a check from the government in ten days.

But rapid refund isnt really an accurate name. In reality,

they are working with a bank that offers you a short-term
loan in anticipation of your getting a tax refund. In order
to secure this refund/loan, youll need to fill out some
extra paperwork, including the loan application and a
form releasing your refund to the people who make the
loan. When the tax refund arrives, it goes straight to the
lender to pay back what you owe.

Last year, the National Consumer Law Center estimated that

the typical price for a typical refund anticipation loan
(RAL) of $1,500 was a total of $61.22. This translates into
an astonishingly high APR (annualized percentage rate, or
what you would pay over a whole year for a loan) of
149%. And we thought a 25% credit card APR was high!
In fact, the fees and interest on these loans are high enough
to be considered predatory by consumer advocates. And
with such high fees at stake, the National Consumer Law
Center cautions that some preparers might try to inflate
your refund to make borrowing against it seem more
appealing. Fortunately, RALs might be on their way out,
because of a concerted effort by several government
agencies, including the IRS, to make it extremely hard for
the lenders to make these loans legally. But until then, its
good to know the facts.

Desperate consumers who are out of

borrowing options are using their
automobiles as collateral and paying $3.5
billion a year in interest for so-called
"title loans.
The average loan is $950, and borrowers
take on average 10 months to repay the
loans. This means they'll spend $2,140 to
borrow the money. Title loans are only
allowed in about half of U.S. states.

Aggressive late-night television ads pitch

title loans as a solution for consumers
who find themselves needing short-term
loans but can't use standard options,
such as credit cards. Generally,
consumers can borrow up to 26 percent
of what the car is worth, which they
must own free and clear.

Loans are often issued at 25 percent

interest per month: In other words, it
costs $250 to borrow $1,000 for a month.
The risk, of course, is that borrowers can
lose their cars to repossession if they
default. Borrowers must often leave a
copy of their car key with the lender to
make repossession easy.

Loans are often issued at 25 percent

interest per month: In other words, it
costs $250 to borrow $1,000 for a month.
The risk, of course, is that borrowers can
lose their cars to repossession if they
default. Borrowers must often leave a
copy of their car key with the lender to
make repossession easy.

Another unique and concerning

characteristic of title loans: Issuers often
don't make any assessment of a
borrower's ability to repay the loan. In
fact, some brag in advertisements that
they don't run credit checks, and
borrowers don't need to prove
employment to obtain the loans.

 UNIT

The student will be able to

IDENTIFY the procedures and
ANALYZE the responsibilities of
borrowing money.