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Chapter 6.docx

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University of Guelph
BIOL 1500
Marie Therese Rush

Chapter 6Choosing a Source of Credit The Costs of Credit AlternativesSources of Consumer Credit credit costs money so you should weigh benefits of buying an item on credit versus waiting until you have saved up enough money to pay using cashshould avoid credit in two situations1 when you do not need or really want a product that requires financing2 when you can afford to pay cash almost always cheaper than using creditsome stores offer discount for using cashWhat Kind of Loan Should You Seekinstallment loans may carry lower interest rate they are less expensive credit option for loans repaid over period of many monthsyearssince credit cards usually provide float period certain number of days during which no interest is charged they represent cheaper way to make credit purchases that are paid off in month or two Inexpensive Loansparents or family members often source of least expensive loan may charge you only the interest they would have earned if they didnt make the loanall loans to and from family members should be in writing and state the interest rate if any repayment schedule and final payment dateGuaranteed Investment Certificate GIC or cash value of whole life insurance policy are other inexpensive channels to borrow moneyMediumPriced Loansoften can obtain mediumpriced loans from banks trust companies and credit unionsborrowing from credit unions provide credit life insurance generally are sympathetic to borrowers with legitimate payment problems and provide personalized servicecredit unions often offer same range of consumer loans that banks and financial institutions domore than 10 million Canadians belong to credit unions and the number of credit unions has been increasing steadily about 800 exist in Canada todayExpensive Loansconvenient to obtain the most expensive loans available are from finance companies retailers and banks through credit cardsfinance companies often lend to those who cannot obtain credit from banks or credit unions typically interest ranges from 1229organizations like Money Mart provide chequecashing and related financing services that can cost up to 1 per week by law in Canada no lender can charge higher than 60yearborrowing from car dealers appliance stores department stores and other retailers is also expensive usually 20cash advancements on Visa or MaterCardStudent Loansinexpensive loans to finance education beyond high school is available from Government of Canada interest lower than commercial rates because rates are subsidized by federal governmentdont have to repay loan until finished educationGovernment Student Loan ProgramsGovernment of Canada offers loans to full and part time postsecondary students who demonstrate financial need in most provinces and territories Canada Student Loans Program CSLPfederal loan open to both full and part time students
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