Loan Fundamentals
Student Activity Packet
UNIT: TYPES OF CREDIT
Name: Ibtihaj Jama
Students will be able to:
● Interpret data to understand what types of debt the average American household has
● Differentiate between amortized installment loans and revolving credit lines
● Read an amortization table and understand how the payments are structured
● Describe how Buy Now, Pay Later plans work
NOTE: Vocabulary for this unit can be found in the NGPF Personal Finance Dictionary
INTRO
PROMPT: Household Debt & Credit Report
The Federal Reserve Bank of New York maintains these graphs every quarter to depict total
household debt in the US. Review the first two graphs (skip the third on delinquency) using the
link above and use them to answer the question that follows.
1. Based on this data, what observations can you make about household debt in the US?
Household debt is larger than non-housing debt. And over the years the debt goes up
by a few, and by the span of a few years it's gone up by trillions.The categories stayed
relatively proportional with the increase.
LEARN IT
EDPUZZLE: Amortization
Home mortgages, auto loans, and student loans are all typically structured as amortized loans.
While the minimum monthly payment on a credit card changes each month, the monthly
www.ngpf.org Last updated: 3/26/24
1
payment of an installment loan is the same every month until the debt is paid off. Watch this
video and follow your teacher's directions to answer the questions either in your student activity
packet or within the EdPuzzle itself.
NOTE: EdPuzzle videos shuffle answer choices and do not always match the order provided here.
1. A fully amortized payment is split into which two components?
a. The principal and the payment
b. The principal and the interest
c. The loan term and the interest
d. The interest rate and the total interest
2. Casey has an amortized loan payment of $400, and the interest they owe for that
month is $50. By how much does Casey pay down the principal?
a. $50
b. $350
c. $400
d. $450
3. As the months progress on an amortized loan...
a. The payments stay the same, but the principal is paid down more quickly
b. The payments stay the same, but the principal is paid down more slowly
c. The payment sizes decrease, but the principal is paid down at the same rate
d. The payment sizes decrease, and the principal is paid down more quickly
4. If you can afford it, why is it a great idea to pay MORE than your amortized payment on
a car, home, or other loan? Select all that apply.
a. You will pay your loan off faster
b. You will pay less total interest
c. You will pay less total principal
d. You will pay less money overall
DO IT
ACTIVITY: ANALYZE: Understanding Amortization
Amortized loans are straightforward when it comes to making payments: The same amount is
due every single month, and if you can make larger payments, you’ll pay the loan off quicker. But
understanding exactly how the amortization table works and how those monthly payments are
distributed is a little more complicated. Follow the directions on the worksheet to complete this
activity.
www.ngpf.org Last updated: 3/26/24
2
FINCAP FRIDAY: What’s Buy Now, Pay Later?
In recent years, a different type of installment loan has become popular on online shopping
checkout screens and even in some stores. It’s commonly referred to as “Buy now, pay later.” As
your teacher progresses through the slides, answer these questions, just writing A, B, C, or D for
questions 1 - 5.
1. Question 1: D
2. Question 2: D
3. Question 3: C
4. Question 4: B
5. Question 5: C
6. If Buy Now, Pay Later loans are just breaking your payment into 4 equal parts, how
could this deal possibly become problematic to the borrower?
EXIT TICKET
Follow your teacher’s directions to complete the Exit Ticket.
www.ngpf.org Last updated: 3/26/24
3
