| A | B |
|---|
| 3 C's | Character, capacity and collateral |
| Character | integrity |
| Capacity | sufficient money and income (ability to repay) |
| Collateral | assets to secure debt |
| Cost of credit | principal + interest = total cost |
| Law 1 of credit | longer the loan in time - the lower the payment but the more interest you pay |
| Law 2 of credit | the shorter the loan in time- the higher the payment but the less interest paid |
| What happens when you default | poor credit, higher interest rates in the future or default |
| Mortgage | Home loan |
| Timeframe (usually) | 15 or 30 years |
| Reasons to deny credit | credit history, credit score, inadequate income or too much debt |
| Fixed rate mortgage | interest stays the same through the life of the loan |
| Variable rate mortgage | interest rate is lower at the beginning but can go up because of inflation during the life of the loan |
| Down payment | can be cash or a auto trade-in - provides skin in the game |
| FHA (Federal Housing Administration) Loan | government program for 1st time home buyers and must meet the income guidelines. Can be low or no downpayment |
| VA (Veteran's Administration) Loan | active or ex-military in good standing can use this program to finance up to 100% of the loan with no downpayment |
| Collateral | title or property that is held until payment is completed |
| No collateral | no property is held for the loan payment |
| Credit Card Act of 2009 | Credit card company must give 45 days written notice to change the terms. Age and income limitations such as under 21 must show ability to repay. |
| Truth in Lending Act | clearly disclose APR (annual percentage rate), cost of interest, and total cost to repay |
| Annual Percentage Rate | rate of interest that you will use to determine interest paid back on the loan |
