Chapter 7

Under ____ bankruptcy, most of your debts are discharged - a "more severe" type of bankruptcy.

Chapter 7

___ Loans allow students to combine all of their eligible federal student loans into one loan`

Direct Consolidation

___ or ___ loans provide short-term funding until longer-term or additional financing is found.

bridge or interim loans

A___ loan is a variable-rate loan that can be converted into a fixed-rate loan at the borrower's option at specified dates in the future.

convertible

A ___ defines what actions a lender can take to claim money from you in case you default.

recourse clause

Consumer loans fall into two categories: ___ and ___.

(1) single-payment or balloon loans (2) installment loans.

In order to maintain a reasonable degree of flexibility, ideally you should strive to keep the debt limit ratio below ___.

15 percent

A ___ is a tax-advantaged savings plan designed to encourage saving for future college costs, and it comes in two forms: prepaid tuition plans and college savings plans.

529 plan

A ___ or ___ is a loan that's paid back in a single lump-sum payment at maturity, or the due date of the loan, which is usually specified in the loan con-tract. At that date, you pay back the amount you borrowed plus all interest charges.

A single-payment or balloon loan

___ is the amount you are borrowing, or the principal.

Amount Financed

The___ is the true simple interest rate paid over the life of the loan. It is calculated by dividing the average annual finance charge by the average loan balance outstanding.

Annual Percentage Rate

Under ___ bankruptcy, you design a plan that will allow you to repay the majority of your debts. It is designed so that you can continue to cover normal living expenses while still meeting the repayment obligation.

Chapter 13

___ generally permit a college saver (the prospective student or a parent or grandparent) to establish an account for the purpose of pay-ing for future eligible college expenses like tuition, books, and room and board.

College savings plans

A ____ allows you to make an annual nondeductible contribution of up to $2,000 per year/per person to a specially designated investment trust account. There are contributor income limitations. The account will grow free of federal income tax with tax-free withdrawals. Its main advantage is that it can be used for elementary and secondary as well as higher education purposes. However, contributions stop when the student becomes 18 and must be used by age 30. Any "leftover money" will be charged a penalty as well as taxes.

Coverdell Education Savings Account (ESA)

___ Loans are made only to graduate or professional students

Direct PLUS

___ Loans are made to the parents of dependent undergraduate students. A credit check is required, interest begins accruing immediately, and payments are deferred for 6 months

Direct PLUSParent

___ loans are made only to undergraduates who establish financial need. The government pays the interest on this loan while the student is still in school and during the 6-month grace period following graduation before the student starts loan repayment

Direct Subsidized

___ Loans are made to undergraduate, graduate, and professional students. It is not necessary to establish financial need. If a student chooses not to pay interest while in school or during the grace period after graduation, the interest accumulates and is added to the principal of the student's loan.

Direct Unsubsidized

The ___ is a school-based loan program for under-graduate and graduate students who have exceptional financial needs

Federal Perkins Loan Program

___ loans are funded by the federal government, and the U.S. Department of Education is your lender.

Federal student loans

The ___ includes all the costs associated with the loan—for example, interest payments, loan-processing fees, fees for a credit check, and any required insurance fees.

Finance Charge

___loans are very common and are used to finance cars, appliances, and other big-ticket items.

Installment loans

Home Equity Loan: Advantages

Lower Interest Rate Tax deductible up to a maximum of $100,000

___ generally allow college savers to purchase units or credits at participating colleges and universities for future tuition and, in some cases, room and board. Most of these plans are sponsored by state governments and have residency requirements. Many state governments guarantee investments in the plans that they sponsor.

Prepaid tuition plans

___ loans are meant to provide you with funds only after you have exhausted all federal financial aid. These loans are usually offered by commercial banks and credit unions.

Private student

Home Equity Loan: Disadvantages

Puts your home at risk limits future financing flexibility you can have only one home equity loan outstanding at a time.

(T/F) Because the lender bears more risk, fixed-rate loans generally cost more than variable-rate loans.

True

Under the ___, you must be informed in writing of the total finance charges and the annual percentage rate of the loan before you sign a loan agreement.

Truth in Lending Act

An ___ states that if you miss one payment, the entire loan comes due immediately.

acceleration clause

With an ___ loan, interest charges are calculated using the original balance. These charges are then added to the loan, and this amount is paid off over the life of the loan. Loans using this method can be quite costly and, in general, should be avoided.

add-on interest installment

With a variable-rate loan, the ___ bears the risk that interest rates will go up and the payments will increase accordingly.

borrower

A ___ helps you organize your finances and develop a workable plan to pay off your debts.

credit counselor

A ___ states that if you default on a secured loan, not only can the lender repossess whatever is secured, but also if the sale of that asset doesn't cover what you owe, you can be billed for the difference.

deficiency payments clause

With a ___ single-payment loan, the entire interest charge is subtracted from the loan principal before you receive the money, and at maturity, you repay the principal. For example, if you borrow $10,000 for 1 year and the interest rate is 11 per-cent, your finance charge is $1,100($10,000 * 0.11). Under this method, you receive only $8,900 ($10,000 less the interest of $1,100), and in 1 year, you have to repay the entire principal of $10,000. In effect, you really have a loan of only $8,900 because the interest is prepaid.

discount method

A ___ interest-rate loan maintains a single interest rate for the duration of the loan. R

fixed

A ___ or ___ is special type of secured loan that uses the built-up equity in your home as collateral against the loan.

home equity loan or second mortgage

An ___ calls for repayment of both interest and principal at regular intervals, with the payment levels set so that the loan expires at a preset date. The amount of the monthly payment going toward the interest starts off large and steadily decreases, while the amount going toward the principal starts off small and steadily increases.

installment loan

With an ___, you're required to purchase credit life insurance to pay off the loan in the event of your death.

insurance agreement clause

With a fixed-rate loan, the___ bears the risk that interest rates will go up

lender

As you pay off more of the loan each month, your interest expenses decline, and your principal payments increase. This process is commonly referred to as ___.

loan amortization

The ___ attempts to determine if you are earning enough to be able to pay off at least some of your debt.

means test

To qualify for Chapter 7 bankruptcy, as opposed to Chapter 13, you must pass a ____ which determines if your disposable income is lower than your "qualified" monthly expenses, and you must own little property other than basic necessities.

means test

The ___ is the interest rate banks charge to their most creditworthy customers.

prime rate

A___ loan is guaranteed by a specific asset. If you can't meet the loan payments, that asset can be seized and sold to cover the amount due.

secured

If an item being purchased is to be used as collateral for the loan, then the contract will contain a ___ saying so.

security agreement

The ___ identifies whether the lender or borrower retains control over the item being purchased.

security agreement

The ___ method is the most common method of calculating payments on an installment loan.

simple interest

A ___ or ___ interest-rate loan is tied to a market interest rate, such as the prime rate or the 6-month Treasury bill rate. The interest rate you pay varies as that market rate changes.

variable-or adjustable