Using CrediT Minimise your debt

Transcription

1 Financial Capability Unit Standard Student Workbook Using CrediT Minimise your debt US Level 3 Credits 3 Version 2 Analyse credit options and select strategies to manage personal finances Name:

2 Instructions Welcome to this workbook about different types of credit, which contains the content knowledge you need to meet NZQA Financial Capability Unit Standard This workbook will assist you with learning about credit options, debt management and strategies to manage personal finances. You will analyse credit options in terms of their advantages and disadvantages in relation to a range of components. A range of debt management strategies that assist in minimising debt, such as communicating with creditors, will also be investigated. The workbook contains content notes to cover all requirements of this unit standard. There are also a range of activities and tasks for you to complete as practice and to help consolidate your understanding. Your teacher will provide you with the necessary guidance to help you complete these successfully. Some of these tasks will require you to complete individual research using the internet, either at school or at home. Your teacher may set some of these activities as homework tasks. 2

3 CONTENTS Using Credit: Minimise your debt Outcomes and evidence requirements 4 1. Credit Options 1.1 Credit Card 1.2 Personal Loan 1.3 Hire Purchase 1.4 Credit Contracts 1.5 Mortgage Features of Credit Options 2.1 Total Cost of Credit vs Cash 2.2 Provider of Credit 2.3 Requirements of a Credit Contract 2.4 Potential Consequences of Using Credit 2.5 Consequences for a Guarantor Debt Management Strategies 3.1 Assessing Advice and Assistance 3.2 Communication with Creditors 3.3 Interest Rate Considerations 3.4 Debt Consolidation 3.5 Adjustments to Lifestyle 3.6 Use of Hardship Provision 3.7. Sales of Non-Essentials

4 Outcomes and evidence requirements Outcome 1 Analyse credit options and select strategies to manage personal finances. Evidence requirements 1.1 Features of two credit options are analysed and compared in terms of advantages and disadvantages, in relation to personal finances. Range: Two credit options include credit card, and one of: personal loan, hire purchase, credit contract, mortgage; features include total cost of credit versus cash price; provider of credit; length of time; credit contract requirements; potential consequences of using credit; consequences for a guarantor. 1.2 Debt management strategies are described in relation to personal finances and strategies selected for given situations to minimise debt. Range: debt management strategies may include accessing advice and assistance, communication with creditors, interest rate considerations, debt consolidation, adjustments to lifestyle, use of hardship provisions, sale of non-essential items; evidence relating to three different strategies is required. Achieved, Merit, or Excellence: This unit standard can be awarded with Achieved, Merit, or Excellence. Criteria for Achieved For the Achieved grade to be awarded, the outcome must be achieved as specified in the outcome statement. You must: analyse the features of two credit options and compare their advantages and disadvantages, in relation to personal finances, describe debt-management strategies in relation to personal finances, select strategies for given situations to minimise debt. For Merit or Excellence to be awarded, the candidate must meet the Merit or Excellence criteria specified below. Criteria for Merit You must: explain how the selected debt-management strategies can be used to minimise debt in relation to personal finances for the given situations. Criteria for Excellence You must: include a justification for the selection of the debt-management strategies, with supporting examples, to show how they can minimise debt in relation to personal finances for the given situations. 4

5 Definition Credit refers to the creation of any form of deferred payment. Credit contract requirements refer to consideration, capacity, legality, intent, consent. Debt refers to an asset obligation owed by one person to another. Total cost of credit may include deposit, term of credit, interest costs, repayment instalments, frequency of repayments, early repayment penalties, and other charges. 5