intro 2 - TTU Personal Finance Concentration PFP 4361...

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TTU – Personal Finance Concentration TTU Personal Finance Concentration PFP 4361 Personal Finance: Advanced Topics and Case Studies Module 1 – Review of Personal Finance Part II
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TTU – Personal Finance Concentration Presentation Agenda 1. Credit and Debt Management 2. Providers of Financial Services 3. Mortgage and Tangible Assets Financing 4. Interest Rate Fundamentals
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TTU – Personal Finance Concentration Develop a Debt Management Plan to Control Credit Usage The major sources of consumer credit are financial institutions such as commercial banks, building and loan associations, licensed lenders, credit unions, credit card banks, risk managers, and insurers. Other sources of credit are non-financial, including governmental agencies, families, friends, and community-based organizations. Debt management is the ability to meet debt obligations in both the short term and the long term.
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TTU – Personal Finance Concentration Credit Management The cost of credit includes the finance charge quoted as the Annual Percentage Rate (APR). Interest payments represent part of the finance charge. Other components of the finance charge can include service charges, appraisal fees, credit-related insurance premiums, and punitive interest rates levied on certain borrowers. The Annual Percentage Rate (APR) reflects the actual rate of borrowing. It expresses the relative cost of credit on a yearly basis and is the key to comparing costs between and among lenders. Approximate APR = 2 x n x I P(N + 1) where, n=Number of payment periods in one year P=Principal, net amount of the loan I=Total dollar cost of credit N=Total number of payments to pay off loan
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TTU – Personal Finance Concentration Debt Management Debt can be a serious problem if not controlled properly. Evidence of debt mismanagement can include, but is not limited to: Emotional problems Loss of income “Keeping up with Jones;” “Keeping Ahead of the Smith” Overindulgence Instant gratification Using money to punish or to comfort Sickness and Long-term Illness Unemployment Overextending Miscommunication and misunderstanding of finance charges
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TTU – Personal Finance Concentration Signals of Debt Mismanagement According to the Consumer Credit Education Foundation, some of the warning signals of a potential debt problem: Paying only the minimum balance on a credit card bill each month Missing payments Paying late Paying some bills this month and others next month Intentionally using the overdraft or automatic loan feature on a checking account Putting off medical and dental visits because you cannot afford them right
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This note was uploaded on 10/17/2011 for the course PFP 4361 taught by Professor Vickihampton during the Spring '11 term at Texas Tech.

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intro 2 - TTU Personal Finance Concentration PFP 4361...

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