Personal Finance Ch. 6

which law allows a borrower to sue a creditor or credit bureau that verifies incorrect data about his or her credit history?

Consumer Credit Reporting Reform Act

T or F: Bankruptcy should be used as a last resort

TRUE

the greatest disadvantage of using credit cards is

being tempted to overspend

what steps could one take to increase their chances of obtaining a loan?*

build a good credit score put up collateral big down payment make a shorter loan period variable interest rate

which of the "five C's of credit" does your income affect?

capacity

credit as a one-time loan that you will pay back over a specific time in payments of equal time

closed-end credit

a form of security to help guarantee that the creditor will be repaid

collateral

a loan means that you agree to be responsible for the loan payments if the other person fails to make them

consigning

arrangement to receive cash, goods, or services now and pay for them in the future

credit

Chapter 7 bankruptcy relieves an individual from debts arising from

credit card charges

List the disadvantages of using credit*

credit costs money temptation to buy more than you can afford could lose some of your income and property if you do not pay credit bills on time doesn't increase your total purchasing power

a measure of a person's ability and willingness to make credit payments on time

credit rating

an entity that lends money

creditor

under the Equal Credit Opportunity Act, you may sue a creditor if the creditor

discriminates against you

credit as a loan with a certain limit on the amount of money you can borrow for a variety of goods and services

open-end credit

how might you prevent a thief from stealing personal credit information from your trash?

shred everything go online; paperless

if net income is $800 what is the max one should use on debt payments?

$160 a month or less

what does the Consumer Credit Counseling Service offer?

help you understand and analyze your finances it is for anybody

the interest computed only on the principal, the amount that you borrow

simple interest

the use of credit for personal needs

consumer credit

you will probably find the least expensive loan from

family members

what do commercial banks and finance companies both do?

lend money for profit organizations

the maximum amount of money a creditor will allow a credit user to borrow

line of credit

someone signed a contract to pay for something in 6 equal installments... what type of consumer credit is this person using?

Installment Closed-End Credit

no matter how often you make payments, interest is calculated on the full amount of the original principal with the

add-on interest method

the cost of credit on a yearly basis, expressed as a percentage

annual percentage rate (APR)

what five C's of credit would someone that has paid for two trucks in cash have and which would they not? what questions is a creditor likely to ask them about the other 5 C's?

have: collateral not: credit history Income source? How long have you worked? How much is in your savings?

which law gives a borrower the right to stop payment?

Fair Credit Billing Act

the legal process in which some or all of a debtor's assets are distributed among creditors because the debtor cannot pay his or hers debts is called

bankruptcy

what seven question should one ask themselves when deciding whether or not to finance a purchase?

book... can I afford it? how much is in my savings? what is the cost of credit?

contrast borrowing from a commercial bank and a finance company*

commercial banks: costumers with established credit collateral larger loan amounts repayment based on use of loan credit rates vary based on 5 C's long detailed application could take several days

the smallest amount you can pay and remain a borrower in good standing

minimum monthly payment

the income you receive (take-home pay, allowance, gifts, and interest)

net income

the usual trade-off of choosing small payments is

paying more in interest

what are some steps one could take to achieve and maintain a good credit rating?*

use a credit card pay bills on time have money in savings don't move or change jobs a lot borrow $ and pay it back

the total dollar amount you pay to use credit

finance charge

a time period during which no finance charges will be added to your account

grace period

the periodic charge for using credit is called

interest

List the advantages of using credit*

lets you enjoy goods and services now and pay for them later allow you to combine several purchases making one monthly payment makes it easier to shop online allows you to travel without carrying a lot of cash creditors can view you as a responsible person

how might someone obtain a low interest rate and make low monthly payments?

low interest from a collateral down payment extend the length of the loan