Broward Community College - Silver Sands Yearbook (Fort Lauderdale, FL)

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'1 -JOEAS DEPT- S-FCQE, -- pang DQPT. , FORNFVDRJE. OEPC caan Q DF-Prom . W ,f i x 'f I 1 - - i y ' iii f ,X ffgff . , I , 0 A 1 y 111317, In 1 , 1 if 11- X 1 la 1+-V fi 1fO'H'U7L1'i 'rf .e borrower only receives 39400, t the interest charge is on the full 00.00, bringing the annual interest e to 1276. Most dealers can offer different in- 'est rates to prospective buyers. The aler will pull out an orange card Jwing monthly payments based on 95 interest, or a grey card for 925. r may also have green, blue, white d red cards. All the various per- itages down to 576. The dealer ,nts as much interest as he can get. he charges SZ and the lending in- tution he deals with is willing to :ept 6513, he get a 296 kickback. That on 32,000 for a 2 year period is 0.00. On a 3 year contract it is 20.00. This is why some dealers 1 able to reduce the initially stated ice when a buyer begins to bargain. There are several factors that can vern interest rates. If the prevail- ing interest charge in a certain area is SZ, it may be difficult getting a lower rate. But try anyway. The dealer may accept. Most young con- sumers do not realize that interest rates can be flexible. The value of the item being fin- anced lias a bearing on the interest rate. If a lending institution loans 551,000 on something worth 82000, it will probably come out ahead in the event of repossession. If it lends 351,900 on S2,000, it could be in trouble, and will charge accordingly. If you have a bad credit rating the lending institution who takes you on can charge more interest. The dealer himself can cost you money. The money lender looks at the financial condition of the dealer to be sure he can pay any losses if the buyer should default on his pay- ments. If the dealer is shaky, the risk is passed on to the buyer in the form of high interest rates. For several years there have been bills in Congress to make it a law that the seller state clearly the actual cost of credit. Public support has not been sufficient to get this bill passed. The unwary customer doesn't seem to care how much he has to pay out to get something immediately. Because of easy credit, Amer- icans are going bankrupt in increas- ing numbers. In 1946, there were 10,000 personal bankruptcies. In 1965, there were 163,000, and the number is constantly increasing. A Utica, New York judge says, Credit is too easy. Second, credit is too ex- pensive for the poor suckers. A fel- low buys a trailer for S-1,000, and by the time he is through paying for it, he has forked out 552,000 in credit charges. VVhen applying for any kind of credit, the first economic lesson for the young consumer is never sign any- thing without reading it first. Last October in Los Angeles, 7,000 home- owners received identical notices that their interest rates were being raised from 6.627 to 7.62. The bank had a legal right in raising the interest rates because of an original lending agree- ment between the bank and the land developer. The fine print in the home- owner's contracts said, The under- signed . . . hereby assumes and agrees to perform all of the covenants of the developer's loan agreements. The people protested and over 2.000 be- gan picketing the bank. The bank, faced with mass public revolt, agreed to rescind the rate boost and abolish the escalation clause. Besides high interest rates, many lending institutions are making a kill- ing on credit life insurance. Much of the premium is pure profit because a good bit of it is funneled back in the form of commissions. or because the loan company owns the insurance company. Because of this, the finance company will work the insurance premium costs as high as possible. Another area in which young peo- 15

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The average American has been described as one who drives a mort- gaged car down a bond-financed highway, using a credit card. He lives in a mortgaged home with furniture, appliances and household items paid for on the installment plan. Most junior college students have probably not been introduced to the world of high finance. Their only time pur- chase so far may be an automobile or Hotdogs Hamburgers and HIGH FINANCE NVWK 1 T663 I I rfb QQ ' vw O C, 2032 1- J? 3 to 6,3 U1 gp 5.23 Q Nei vi 7' oi 5 -Ultllgb TI p TIE 6, W F YI 3: W 1 7-2 IN I 14 by JOANNE SIFRIT ig is SIMM Q59 'DQ QEBIEJ some type of charge account. Soon many will be marrying and starting a home. If not careful, the unwary stu- dent may be bankrupt in ten years. A government survey reports that the average bankrupt man is 30 years old, makes a little over 855,000 a year, has a wife and three children, and owes creditors 371500, not counting the mortgage on his house. He is making monthly payments on a house, a car, furniture, refrigerator, washing machine, TV set, and several personal loans, which takes most of his pay- check. In addition he has other ex- penses such as utilities, medical bills, clothing, transportation and food. Credit is a way of life in many a family budget. It is estimated that one tenth of the 60 million American families have at least 407- of their yearly income allocated to debt pay- ments. In a study last year by U. S. News and XVorld Reports magazine, it was noted that down payments are get- ting smaller and time allowed for re- payment increasingly longer. Mer- chants have devised all kinds of charge it techniques available even without good credit. Pay checks are becoming more fully committed to installment payments. Many Amer- icans consider being in debt a way of lift- and show little interest in how much it costs to buy on the install- ment plan. The International Consumer Credit Association of St. Louis says, There is no such thing as an easy payment . . . those most susceptible to the 'easy credit' pitch are the poor and the young. They get talked into easy credit deals and end up paying more than they would at a reputable store. There are some advantages to time buying, and it is difficult not to use credit with the constant stream of credit advertising tempting you. By installment buying, a person in a low income bracket can live better earlier in life. He can have the nicer things of life that upper income people take for granted. And if informed, he can obtain credit at a minimum cost and avoid the unscrupulous merchant that sells more debt than a person can af- ford, and at exhorbitant prices. The University of Michigan Re- search Center has found that few people know what interest rate they are paying on installment purchases and loans. They are not interested in what the finance charges are. Their only concern is the amount of monthly payment. Many people are like the young man who after checking with three auto dealers said he had found the best deal . . . his old car and 382.00 a month. When asked for how many months he would have to make payment, he replied, Who caresl All I need to know is that I can swing the 882.00 a month. When a person decides to buy on credit, he is faced with one of several financing techniques. He may be told the amount of down payment and the amount of monthly payments for one. two or three years. Interest rates are not mentioned. He may be told 'that the interest rate is 675 or 36.00 per 3100.00 bor- rowed. Actually, this type of interest charge amounts to approximately 11.58Z, because the borrower is steadily paying off the 3100.00 His average amount of debt is about 85000. yet he is being charged a full 36.00 interest on 85100.00 A third technique is the buyer is told that his loan will be discounted at GZ interest. This actually means that 36.00 is deducted from 310000.

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ple should beware is department stores where charging is conveniently offered. In times gone by there Were onlv two ways of charging. You bought the item on time. by mak- ing a down payment and pledging the balance of payments at a fixed weekly or monthly installment which This type of store credit is rela- tively expensive and should be used sparingly. The price of borrowing, like the price of bread, has been going up and all borrowers are paying higher interest rates. There are several tips that may s HELP if QKWN if -sf 9 fi O T ,- 61 LN:'Nf ,,6b X ceeo fa: L r. 5, ff ..., H555 l w included a slight interest charge. The other method was the charge account where you paid nothing down and were billed at the end of the month for the full purchase. The credit was free, although the price may have been tl shade higher than in cash only stores. Today, charging is usually on some sort ol revolving account. which is neither an installment or .1 charge account. The store may run the plan or it may be handled by .1 bank or lending institution. The monthly installment is calculated from tht- balance amount and functions as an open-end installment plan. The monthly payments constantly reduce the balance while new purchases build it up again. The seiyicc charge is usualy 1357 of each months balance or lb!! simple annual interest. Obviously, the cheapest form of credit is the old charge account. lic- tailcrs like the revolving plan because there is a service charge 1-yen when the balance is paid within .Stl days. 16 help the young person before he gets overwhelmingly in debt. Borrow only when necessary and then as little as possible. Build up a savings account and use some of this for your purchases. The interest you lose is smaller than the interest you pay. Shop around for the lowest interest rates. A bank usually offers loans at 671 annual interest, while a small loan company may charge as much as SZ interest a month. Look for built-in credit. Some stores allow as much as 90 days with- out interest charges. Consider the possibility of an in- surance loan. If you have an insur- ance policy that is a few years old, the cash value may be payable to you in the form of a 52' loan. The interest is payable once a year. and the principal payments can be made at your own discretion. Avoid small use of credit. There is usually a higher charge on small debts. Pay for purchases as quickly as possible, but don't make monthly pay- ments too high. With these tips in mind and a prac- tical application of arithmetic, the young consumer should be able to have the things he wants in life and make effective use of credit facilities. 'MARRY f i .Wien 5 lil Meg ilqiiilvy , l A9355 r y j. Ct i ' rg I X .Pinw GN 'f? J C if Q fr 9 A I 5' gc W 6.5 1 U- M-Uwm fr we fs, Q W f ffligfafz ffm i G' N fi 69 J g 148 , , q I