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  • Open Credit and Revolving Credit

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    Kaiwen
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    Credit involves agreeing to pay for goods, services, or cash received at a later date. Open credit and revolving credit refer to the same type of credit arrangement, which is an open line of credit with a set limit that the consumer can continuously access as long as the minimum monthly payment is made. A shorter loan term means a lower interest rate but higher monthly payments, while a longer term means smaller monthly payments but a higher overall interest rate.

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    Open credit and revolving credit

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    Credit involves agreeing to pay for goods, services, or cash received at a later date. Open credit and revolving credit refer to the same type of credit arrangement, which is an open line of credit with a set limit that the consumer can continuously access as long as the minimum monthly payment is made. A shorter loan term means a lower interest rate but higher monthly payments, while a longer term means smaller monthly payments but a higher overall interest rate.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
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    4 views3 pages

    Open Credit and Revolving Credit

    Uploaded by

    Kaiwen
    Credit involves agreeing to pay for goods, services, or cash received at a later date. Open credit and revolving credit refer to the same type of credit arrangement, which is an open line of credit with a set limit that the consumer can continuously access as long as the minimum monthly payment is made. A shorter loan term means a lower interest rate but higher monthly payments, while a longer term means smaller monthly payments but a higher overall interest rate.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 3

    1. Define the term credit.

    How is credit different from


    open credit? What is revolving credit?
    Credit involves any agreement to pay in the future for goods, services, or
    cash received today.

    Open credit and revolving credit are different names for the same service
    which is an open line of credit with a specified limit that is continuously
    available to the consumer as long as an agreed-upon payment is submitted
    monthly.
    7. Explain the relationship between payment
    amount, interest rate and term of loan. What rules
    of thumb apply?
    • Shorter term loan means lower interest rate and larger
    monthly payments

    • Longer term loan means smaller monthly payments and


    higher interest rate
    7. Explain the relationship between payment
    amount, interest rate and term of loan. What rules
    of thumb apply?
    Total monthly nonmortgage debt payments
    Debt limit ratio =
    Total monthly take-home pay
    Debt Limit Ratio • percentage of take-home pay committed to non-mortgage
    debt
    • ratio should be below 15%
    • > 20% should avoid additional debt

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