Ch 5. Personal Finanance
the general economic CONDITIONS that can affect a borrower's ability to repay a loan
(5C's) Conditions
Collateral
(5C's) a valuable asset pledged to assure loan payments and subject to seizure upon default is called...
local, non-profit organization that provides debt counseling services
A Consumer Credit Counseling Service (CCCS)
a periodic charge for the use of credit
Interest
a line of credit
Karen is notified by her credit card company that credit limit on her credit card has just been increased to $10,000. This is one example of...
interest computed on principal only and without compounding
Simple interest
get credit counseling, declare bankruptcy (as a last resort), contact creditors to work out a plan for payments
What can you do if you are unable to meet your credit obligations?
the percentage costs (or relative cost) of credit on a yearly basis
annual percentage rate
revolving credit
another name for open-end credit is...
true
anyone overburdened by credit obligations can phone, write, or visit a CCCS (Consumer Credit Counseling Service) office
false; expensive - charge high interest rates from 12%-25%
borrowing from car dealers, appliance stores, department stores, and other retailers is relatively INEXPENSIVE
true
consumer credit dates back to colonial time; "limb for limb"
false; honest and responsible
consumer credit works because people by and large are DISHONEST AND IRRESPONSIBLE
true
credit is an arrangement to receive cash, goods, or services now and pay for them in the future
false; usually
credit unions RARELY offer the same range of consumer loans that banks and other financial instituions do
calculated by: dividing monthly debt payments ( not including house payments ) / net monthly income
debt payment-to-income ratio is...
calculated by: total liabilities / networth
debt-to-equity ratio is...
true
if your credit application is denied, the ECOA (Equal Credit Oppurtunity Act) gives you the right to know the reasons
true
in the 5C's of credit, capital refers to your assets or networth
direct loan of money for personal purposes
installment cash credit
loan that allows you to receive merchandise such as a refrigerator or furniture
installment sales credit is...
false; do (society based on consumption - afluenza society)
most economics DO NOT recognize consumer credit as a major force in the American economy
true
perhaps the greatest disadvantage of using credit is the temptation to overspend
Equal Credit Opportunity act (ECOA)
which federal consumer credit law prohibits credit discrimination based on sex and marital status?
Truth in Lending Act or Fair Credit Billing Act
which federal law limits a cardholder's liability for unauthorized use of a card to $50?
Fair Credit Reporting Act (FCRA)
which federal law protects you by requiring credit bureaus to furnish correct and complete information to creditors?
false; closed-end 9(mortgage loans, automobile loans, installment loans)
with an OPEN-END CREDIT, you pay back one-time loans in a specified period of time
true
it is safer to use credit, since charge accounts and credit cards let you shop and travel without carrying large amounts of cash
the smallest amount you can pay and remain a borrower in good standing
minimum monthly payment
the borrower's attitude toward his/her credit obligations
(5C's) character
when a debtor with a regular income proposes a plan for using future earnings or assets to eliminate his/her debts over a period of time
Chapter 13 personal bankruptcy
when an individual is required to draw a petition listing his or her assets and liabilities
Chapter 7 personal bankrupcty
350 to 850
FICO scores generally range from...
National Foundation for Consumer Credit (NFCC)
a Consumer Credit Counseling/Management Service (CCCS or CCMS) is affiliated with the...
A mortgage loan
a good example of a closed-end credit is...
capacity
a loan officer is examining your income and the amount of your existing debt payments in decided whether to make a loan to you today. Which of the 5C's of lending is loan officer most likely looking at?
complete an approved instructional course in personal finance management
the Bankruptcy abuse Prevention and consumer Protectino act requires debtors to...
Fair debt Collection Practices Act (FDCPA)
the federal trade commission enforces the...
false; harder
the new bankruptcy law made it EASIER for consumers to file a Chapter 7 Bankruptcy
true
the three most common types of closed-end credit are installment sales credit, installment cash credit, and single lump-sum credit
finance charge
the total dollar amount you pay to use credit is called the...
paying only the minimum balance each month, missing payments or paying late, using savings to pay normal bills, depending on overtime to meet normal expenses
what are danger signs of potential debt problems?
contact the fraud departments of each of the 3 major credit bureaus, file a police report, contact creditors for any accounts fraudulently opened
what should you do if your identity is stolen?
30 days
when you complain about your billing error, the creditor must acknowledge within ____ days
true
you may not be denied credit because you receive Social security of public assistance