FCS 226 Chapter 11 Credit, Debt, and Bankruptcy

FCS 226 Chapter 11 Credit, Debt, and Bankruptcy - Consumer...

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Consumer Credit, Debt, and Bankruptcy
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Introduction U.S. debt is in the trillions of dollars, in turn, bankruptcies have reached record heights Consumers cannot resist the pressure to buy They use credit cards and installment buying (paying debt in increments) Historically credit has helped increase productivity of the country
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Cash lending has always been popular, but prior to 20 th century there were no laws against Usury (the lending or practice of lending money at an exorbitant interest; taking advantage of ignorance and lending at rates higher than the law allows) Mortgages are a common form of debt on durable goods (items that are consumed over a year) Chattel mortgages allow the creditor to hold the title until the debt is paid
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What is consumer credit? It is the money or purchasing power that lending institutions grant to individuals Credit can be dangerous. Consumers should not borrow more than 20% of their net income, and have no more debt than 10% of their monthly income. Watch out for the holidays!
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Commercial Banks: licensed organizations that make competitive loans Finance Companies: Purchase loan contracts from retailers Credit Unions: cooperative pooling of resources to save and
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FCS 226 Chapter 11 Credit, Debt, and Bankruptcy - Consumer...

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