///////Fourteenth  Record//// 

In this particular lesson, we were introduced to consumer credit and different aspects revolving around such. 

con·sum·er :noun /kənˈso͞omər/

a person who purchases goods and services for personal use.

T h e  G i s t 

Today, we learned that credit is the privelege of an individual to use his or her money over a period of time. A debtor is someone who receives a loan and who buys on credit. A creditor is someone who sells credit and lends loans. Credit is a widely used substitution and replacement for ready cash and cheque, and also is a very convenient method of payment. The advantages of credit include instant enjoyment, convenience, emergency costs, savings, credit rating and purchase records. On the contrary, the disadvantages include credit costs, impulse buying, overybuying, and financial difficulties. There are also five main types and sources of credit: charge accounts, credit cards, installment sales credit, consumer loans and mortage loans. A charge acount is a single  purchase-charge account that can only be used at that particular retail store. Some retail stores also include a leeway plan, at which they set your desired product aside until you can fully pay it off. Credit is like taking out a short-term loan and repaying that with interest. Revolving credit involves a required mimimum monthly payment. Installment Savings Credit is a credit thast requires the purchaser to make a 10% down payment, fixed regular payments with finance charges added to the purchased price. The customer takes possession of the object but actually doesn't own it until he or she is fully able to pay is off. Consumer loans are also known as "personal loans". It is used to finance purchase of almost anything other than a house. Unlike credit, however, they lend you a fixed, specific amount of money. There are three different types: demand, term and student loans. A demand loan involves the debtor giving up a collateral in order to guarantee repayment. A collateral is something of value to the debtor. Such a method therefore creates a strong relationship between the creditor and debtor. If the debtor is unable to repay the debt, the creditor is in possession of the collateral. A term loan's biggest advantage is that repayment is based on the debtor's budget. It is a form of of installment credit card, and the borrower agrees to makie fixed monthly payment for a set period of time, usually 1-5 years. A student loan is intended for post-secondary education. As long as the courses and institutions are approved of, the creditor will lend you money. Also, after six months of graduation, repayment is expected to come in, for you are already making an income. Lastly, a mortage loan is special kind of long-term loan for purchasing of property, usually a house. This also involves a collateral. If the borrower cannot repay within 20-35 years, the financial institution is in possession of both the house and the collateral. The term of loan determines the interest rate. Short-term loans have a lower interest rate, for the financial institution is able to accurately predict the economic conditions. However, if it is a long term, they are unable to do so, which is why long-term loans have higher interest rates. We also talked about credit worthiness. It is the borrower's ability to assume and pay back credit. There are 3 Cs involved: character, capacity, capital. Character is the borrower's willingness to pay back credit: their reliability, trustworthiness, responsibility and stability. Capacity is the borrower's ability to repay back the debt. Capital is the value of borrower's assets. These are the aspects that financial instituions look at when theyare looking at a potential debtor. Credit bureaus are businesses which gathers credit information on a particular region. It is not for the sake of rating or evaluating, but for the purpose of selling that information to financial institutions and retail stores. The two main credit bureaus are TransUnion and Equifax in Canada. Credit rating is a measure of someone's credit worthiness. Consolidation loans are loans that are given to a consumer with deveral debts. The disadvantage of this is that the financial instituion will reduce monthly payment to manageable longer term. Interest rate is also lower than a credit card, for that money can be paid towards the principal amount. 

 end .