Module 7: The Bottom Line on Borrowing

Image of woman holding credit card and looking worried.As you get older and begin living on your own, you will find that you will need to purchase some expensive items that you may not be able to pay for with cash. Most people don’t have enough cash available to pay for large things like a car, education, appliances, or a house. Sometimes the only way to buy these items when you need them is through credit.

In this module, we will look at different types of credit, where you can get credit, how you build and maintain your credit, and what to do if you get into trouble with credit by borrowing more than you can pay back.

Our focus is on how to use credit responsibly! It is okay to pay for things over time. It is not okay to live beyond your means by spending more than you make. Before you buy something on credit, you need to calculate what it's going to cost you and whether you can afford the payment.

Credit is a serious issue and many people in the U.S. are carrying way too much debt. This has all kinds of negative impacts on people's lives—even their health. After you complete this module, hopefully you'll be able to make good decisions about credit and avoid the debt trap that so many people fall into.

Pre-Assessment

Take a moment to ask a parent or guardian to name five items they bought this year using credit. Be sure to write down their responses. As you learn about the content in this module, evaulate whether credit should have been used in each situation.

Key Vocabulary

To view the definitions for these key vocabulary terms, visit the course glossary.

20/10 rule Commercial debt-adjustment firm Finance company Origination fee
30-day accounts Compound interest - credit Float/deferred payment Pawn shop/broker
Account disclosure statement Conditions Foreclosure Payday loan
Alimony Consolidate Garnishment Penalty Fees
Annual fees Consumable Grace period Prime rate
APR - credit Consumer debt Inquiries - credit Principal - credit
Balance Consumer finance company Installment plan Promotional incentives
Bankruptcy Credit card Interest - credit Rebate
Billing cycle Credit counseling service Judgment Repossession
Billing statement Credit line/limit Layaway Revolving accounts
Capacity Credit report/history/record Lien Sales finance company
Capital Debt Life insurance policy Secured loans
Cash advance Discharged - credit Liquidation Service credit
Character Eviction Loan Simple interest - credit
Child support Exempt Loan term Tax sheltered annuity
Closed-end credit FICO score Minimum payment Title loan
Collateral Finance charge Open-ended credit Unsecured loans