Consumer Credit & Investments

Consumer Credit & InvestmentsOpposite sides of the same coin

One side of the coin is…..

Credit

The other side is ….

Investment

Credit has two general types

Secured credit Like a mortgage or an

installment loan

Unsecured credit like a credit card

Secured credit has collateral…

Collateral is something of value that can be taken back if the loan is in default—not paid back

Unsecured credit is issued on your good credit rating only

Your credit rating affects how much you can borrow, what your interest rate will be and how long you can borrow the money for.

All based on your credit history of managing your credit in the past– your image in other words

Risk Reward for both Credit & Investment

Credit greater risk = higher interest rates

Investments greater the risk = the higher the potential reward

Money is like water: the flowage rate is related to the temperature

More liquid = easier to spend (turn into) like cash: it really flows fast

Less liquid (or frozen in a long-term investment) more difficult to turn back into cash & spend