Unsecured and Secured Loans

Lesson Content

• Lesson Plan Template:

  CTE Lesson Plan

• CTE Course Info and Benchmark Notes

  
  

  Program Title (as applicable): N/A

  Course Title: Personal Financial Literacy

  Course Number: 8500120

  Career Cluster: Finance

  CIP Number: 09200104PA

  Course Type: Non-Career Preparatory

• Unit Outline

  
  

  This lesson can be used within a unit focused on understanding and comparing the different types of consumer credit. The unit can start with identifying and exploring different types of consumer credit, limited to loans and credit cards. Then, the unit would continue with a focus on consolidating and analyzing all information gathered to compare each type of consumer credit to understand which types of credit are most advantageous given a person’s creditworthiness and/or financial needs.

• Career Connection

  
  

  Students will apply the career-ready practices of attending to personal health and financial well-being and communicating clearly, effectively, and within reason, in this lesson plan. By exploring secured and unsecured loans and discussing the characteristics of each, students will be able to differentiate between the two types of loans and begin to understand why each loan could be an attractive option for consumers.

• Learning Objectives

  
  

  Students will be able to:

  • Identify characteristics of unsecured loans
  • Identify characteristics of secured loans
  • Distinguish between unsecured and secured loans
  • Explain how creditworthiness affects consumers’ ability to obtain unsecured loans
  • Explain how creditworthiness affects consumers’ ability to obtain secured loans
  • Consider why loans may be an attractive option for consumers

• Prior Knowledge

  
  

  Students should be familiar with:

  • Loans as a source of credit
  • Explaining the concept of creditworthiness

• Guiding Questions

  
  
  • What are some differences between secured and unsecured loans?
  • What are some similarities between secured and unsecured loans?
  • Why might a consumer prefer a secured loan?
  • Why might a consumer prefer an unsecured loan?
  • How does creditworthiness affect a consumer’s ability to obtain different loans?

• Procedure

  
  

  1. To introduce the lesson, have students brainstorm their prior knowledge of loans. The teacher can pose the question “What do you already know about loans?”.

  • Allow students time to think individually, then in pairs, and as a whole class. Consider using chart paper to keep track of students’ prior knowledge of loans.
  • Use student responses as a segue into the activity. Explain to students that there are many different types of consumer credits including loans. Today, they will be exploring two types of loans: unsecured and secured loans.

  2. Pass out a Loan Types handout (see attachment) to each student. Students should work individually or in pairs to complete the handout.

  • While students are working, the teacher can visit each pair to answer any questions, check student progress, and check the accuracy of information.
  • Allow students to share information with another group to consolidate information.

  3. Bring the class together to discuss the information they found.

  • The teacher can use the guiding questions to facilitate discussion during this time.

  4. To bring the lesson to a close, have students reflect on secured and unsecured loans by completing a journal prompt. The teacher can assign specific journal prompts or let students choose from the prompts below.

  • Journal Prompt 1: Explain a situation in which a person may be more inclined to seek out an unsecured loan.
  • Journal Prompt 2: Explain a situation in which a person may be more inclined to seek out a secured loan.
  • Journal Prompt 3: Based on your findings, are secured or unsecured loans a better option for consumers? Explain your reasoning.
  • Journal Prompt 4: Why might a consumer choose to take out a loan versus paying with cash?

• Teacher Notes

  
  
  • The lesson could also be implemented using split groups; half of the class can research unsecured loans and the other half can research secured loans. Once pairs complete their research on the assigned type of loan, pairs can be grouped into groups of 4 to compare information and fill in the handout.
  • The attachment Loan Types V2 can be used for students who may need additional room to take notes on the handout.

• Optional

  
  

  Formative Assessment Ideas:

  • Students’ responses to the journal prompt(s) can be used to assess their understanding of secured and unsecured loans.

  Extension Ideas:

  • Students can use the website of a financial institution to gather real-time data on requirements for obtaining a secured or unsecured loan.