Managing Credit
"This topic covers why and how people borrow money, the cost of credit, and the potential effect on a person’s finances. "
Grade 4
Managing Credit 4-1
Interest is the price a borrower pays for using someone else’s money, and the income earned by the lender.
4-1a. Explain why a person who borrows $100 to buy something, often must pay back more than $100 at a future date.
4-1b. Describe the reasons why businesses and individuals sometimes lend money to others.
Managing Credit 4-2
When a person pays with credit, they have immediate use of purchased goods or services while agreeing to repay the lender in the future with interest.
4-2a. Identify goods and services that people often purchase with credit.
4-2b. Discuss reasons people may prefer to buy something with credit rather than paying cash.
Managing Credit 4-3
Lenders are more likely to approve borrowers who do not have a lot of other debt and who have a history of paying back loans as promised.
4-3a. Explain why a person might prefer to lend an item or money to one person over another.
4-3b. Discuss why a person might be reluctant to lend money or personal possessions to someone who has a history of not repaying previous loans.
Grade 8
Managing Credit 8-1
Interest rates and fees vary by type of lender, type of credit, and market conditions.
8-1a. Identify financial institutions and businesses that offer consumer credit.
8-1b. Compare lenders based on type of credit offered, interest rates, and fees.
8-1c. Explain how market conditions impact interest rates.
Managing Credit 8-2
Financial institutions advertise loan costs to potential borrowers using the Annual Percentage Rate (APR), expressed as an annual percentage of the loan principal. Low introductory rates offered to attract customers may increase later.
8-2a. Describe how lenders advertise loan costs to potential borrowers.
8-2b. Calculate APR, given annual interest and loan amount.
8-2c. Investigate what happens to a low introductory interest rate when the borrower misses a payment or makes a late payment.
Managing Credit 8-3
The longer a loan repayment period and the higher the interest rate, the larger the total amount of interest paid by a borrower.
8-3a. Describe the effect of higher interest rates and longer loan terms on the total cost of a loan.
8-3b. For a given monthly payment, loan amount, and loan repayment period, calculate the total amount of interest paid by the borrower.
Managing Credit 8-4
Credit cards typically charge higher interest rates on balances due compared with rates on other types of loans.
8-4a. Explain why credit card interest rates tend to be higher than rates for secured loans, such as automobile loans.
8-4b. Describe how a credit card user can minimize interest charges on their credit card purchases.
Managing Credit 8-5
Lenders charge different interest rates based on borrower risk of nonpayment, which is commonly evaluated using information in the borrower’s credit report.
8-5a. Identify the types of information contained in a credit report.
8-5b. Discuss how a borrower’s credit history can impact their borrowing costs.
Managing Credit 8-6
When people borrow money to invest in higher education or housing, the risks and costs may be outweighed by the future benefits.
8-6a. Explain why using credit to finance education and housing could be beneficial.
8-6b. Assess the benefits and costs of using credit to finance education and housing versus using credit to purchase food and clothing.
8-6c. Justify the use of credit for a specific purchase.
Managing Credit 8-7
Borrowing increases debt and can negatively affect a person’s finances.
8-7a. Identify indicators that a person has accumulated too much debt.
8-7b. Predict the possible consequences of having a lot of debt payments relative to income.
Grade 12 (Coming in the future)
Managing Credit 12-x