Chapter 16 Study Guide -Personal Finance

credit cards are examples of

revolving credit agreements

a line of credit is a preestablished amount you can borrow without a new loan application T/F

true

secured debt is tied to a specific asset that can be used as collateral and repossessed if the borrower doesn't make payments T/F

true

the grace period is a free period that allows you to avoid a finance charge if you pay in full before the due date. T/F

true

state law that sets a maximum interest rate that may be charged for consumer loans is known as

usury law

which statement about an installment purchase agreement is NOT true?

a new purchase may be added on

a debtor is one who lends money or the use of goods and services for payment at a later date T/F

false

collateral refers to financial assets you possess that are worth more than your debts. T/F

false

finance companies takes less risk than banks, so they tend to be more lenient with borrowers who are late making a payment. T/F

false

interest rates on loans are usually higher at credit unions than they are at banks T/F

false

once credit is established, most people should plan on having at least five or six credit cards at any given time. T/F

false

the total dollar amount of all interest and fees you pay for the use of credit is called the

finance charge

a legal business that makes high-interest loans based on the value of personal possessions is called a

pawnbroker

type of short-term borrowing where a lender will extend high interest credit based on a borrower's income and credit profile

payday loan

if you go over your limit or make your payment late, you will likely be charged a(n)

penalty fee

which of the following is an example of service credit?

phone bill

one difference between a charge card and a credit card is that

the full balance on a charge card must be paid each month

Finance companies charge higher rates of interest on loans because

they take more risks

Credit is the most commonly used method of purchase in the United States. T/F

true

Most credit cards are revolving credit agreements. T/F

true