Finance 101 Chapter 6 Royer

The number of unbanked or underbanked households in the United States is approximately:

34 million households

Which of the following factors helps determine whether a car is affordable? The monthly loan payment. The monthly insurance cost. The monthly gas and maintenance cost. All of these answer choices are correct.

All of these answer choices are correct.

Service members should always check for other sources of loans before taking a payday or other alternative loan, including the

Army Emergency Relief, Navy and Marine Corps Relief Society, Air Force Aid Society, and Coast Guard Mutual Aid.

Why do consumer advocates advise against using alternative financial services?

Because of the high-cost associated with the loans and other services.

All of the following factors combine to help determine whether a vehicle is a value except: Low price. High quality. Level of style and fun. Both low price and high quality.

Both low price and high quality.

Eventually, use assets, such as automobiles, will no longer work well and will need to be replaced.

Depreciation

When shopping for a new car, which of the following should be the first step in the buying process?

Determine your transportation need.

Available to graduate and professional students. Direct PLUS loans are also available to parents of undergraduate students to help pay for education expenses more than the capped amounts available through the other federal student loan programs. Interest on the loan is added to the loan balance, or students can pay the interest only until they're no longer attending school and repayment begins. Students don't need to show financial need to receive these loans.

Direct PLUS loans

Allow students to consolidate all of their federal student loans into one easy-to-manage loan

Direct consolidation loans

Federal student loans made to undergraduate students who demonstrate a financial need. If the student is enrolled in school for more than half-time, interest on these loans is paid by the federal government, making these loans the best value if you have to borrow.

Direct subsidized loans

Made to undergraduate, graduate, and professional students. Interest on these loans is added to the loan balance until payments begin—which is usually 6 months after graduation—and interest continues to be charged as payments are made (standard loan). The annual amount a student can borrow under both the direct subsidized and direct unsubsidized loans is capped. Students don't need to show a financial need to receive these loans.

Direct unsubsidized loans

To determine what types of financial aid that you may receive, you must first submit a

FASFA

The primary form of student financial aid. There are four types

Federal direct loans

Forbes magazine found that 61% of households earning more than $250,000 per year—the top 2% of households by income—drive common cars made by

Honda, Toyota, Volkswagen, and Acura

Rank the following types of loans from least expensive to most expensive. I. Payday loan. II. Cash advance on a credit card. III. Pawnshop loan. IV. Subsidized student loan.

IV, II, III, I

paid to the lender for providing a loan

Loan origination fees

Compared with repayment plans based on a borrower's income, the standard repayment plan will generally:

Minimize the amount of interest paid. Payoff the loan more quickly. Have a higher monthly payment.

Allows any remaining student loan balance to be forgiven after the borrower makes 120 (10 years) of on-time payments while working for local, state, or federal government entities or for 501(c)3 not-for-profit organizations

Public Service Loan Forgiveness (PSLF) Program

legal document that outlines the terms of the rental agreement. A lease is intended to protect both the landlord and renter (you) by clarifying what is required of both parties.

Rental lease

an optional budget expense, pays for your lost, damaged, or stolen property even if the loss doesn't occur in the rental. Landlords are not responsible for your property, so you really do need this coverage, which is only about $125 per year.

Renter's insurance

The first step in seeking federal student aid from a college or university is to

Submit the Free Application for Federal Student Aid form online

All of the following are alternative financial service providers except:

Target store card

All the following help determine the amount of the loan that you can qualify for when auto shopping except: The safety features of the car. The maximum payment you can fit into your budget. The interest rate of the loan. Both the maximum payment you can fit into your budget and the interest rate of the loan.

The safety features of the car.

You can prepare and submit your FAFSA form online, or you can complete a paper version and mail the document to the

US Department of Education

the interest rate changes periodically (usually every year, but the initial years of the ARM may have a fixed interest rate). Each time the interest rate changes, the loan payment will increase or decrease accordingly.

adjustable mortgage rate

Members of the ___________ such as check cashers, money order providers, pawn shops, payday lenders, auto title loan lenders, and rent-to-own retailers. These types of lenders typically don't rely on an individual's credit report when making a loan decision. Instead, these firms focus on making loans that are collateralized either with an asset or access to a borrower's bank account. In this way, if a borrower makes a late payment or fails to pay, the lender can seize the borrower's assets and enforce payment through other legal means.

alternative financial systems

used in case your application is accepted but you decide not to move in

application deposit

which include all of the associated loan and purchase fees associated with buying a house, such as appraisal fees (to pay for a written document describing the value of the property), title insurance (insurance that protects either the lender or the borrower in case someone says they have a claim on the property after you've purchased it), loan origination fees and points (discussed below), governmental taxes, and some prepaid taxes and insurance

closing costs

Pawn shops and title loan companies base their loan on the value of ____________—something you give the lender that they can later sell if you don't repay the loan in a timely manner.

collateral

The reason automobiles should not be considered an investment is because they

depreciate in value over time.

The best way to handle unforeseen circumstances is to have money set aside in an

emergency fund

The value of the asset less any debt associated with that asset.

equity

a landlord removes a tenant (renter) from the property for breaking a clause in the lease, such as not paying rent on time. The timing of an eviction is determined by state law.

eviction

Because the loan is secured by the real property—in this case a house and associated land—if the homeowner fails to make the monthly mortgage payments, the lender can take possession of the house and sell it to another buyer in a process known as

foreclosure

Financial aid award notifications are sent

from each school indicated on the student's FAFSA form.

Repayment of federal student loans typically must begin within 6 months of completing school or when students are at half-time status or less. The 6-month period is referred to as the

grace period

someone, like a parent or relative, who agrees to pay your rent in case you fail to make rental payments

guarantor

landscaping and exterior maintenance is handled by a

homeowner's association

the difference between what a house could sell for and the amount still owed on the mortgage

housing equity

The Federal Housing Authority (FHA) recommends that homeowners spend less than 31% of their monthly income on housing expenses.

housing payments-to-income ratio

All of the following are true of the FAFSA form except that: it is required to determine eligibility for federal grants, work-study, and student loans. it is used by other financial aid organizations. it is rather expensive to complete and file, and should only be done as a last resort. it often requires financial information about the student and their parents.

it is rather expensive to complete and file, and should only be done as a last resort.

the person or company that owns the property you hope to rent

landlord

financial agreement between you and the dealership where you agree to pay a certain price for the right to drive the car for a set period of time.

lease

The key variable to negotiate in an auto loan is the ______ interest rate possible.

lowest

Members of the ___________which include banks and credit unions. These institutions offer lower interest rates, are more heavily regulated by state and federal government agencies, offer what are considered traditional loan products, and rely heavily on each borrower's credit report and credit score when deciding whether to approve a loan

mainstream financial system

a special type of loan that is secured by real property—land and all improvements on a piece of land, including a personal residence

mortgage

do not represent any lender and can shop many different lenders to find the best mortgage rates

mortgage brokers

which is an insurance policy that protects lenders from nonpayment of the loan, is required if more than 80% of the value of the home is borrowed

mortgage insurance

specializes in mortgages and can help you get preapproved for a loan so that when you find the house you want, you know you can afford it.

mortgage loan officer

captive agents, which means they only represent one lender and will only quote you rates from that lender.

mortgage loan officers

All of the following are types of federal financial aid awards, except: work-study. on campus employment. grants. student loans.

on campus employment

The most popular alternative loan is a ___________, which is a short-term loan designed to be repaid within a few weeks when the borrower receives a paycheck.

payday loan

means that the lender has verified your credit, income, and other important facts and has indicated how much you are able to borrow for the purchase of a house

preapproved loan

which is an insurance policy that protects the lender

primary mortgage insurance

Once you know how much you can afford, you may want to use the help of a __________ to help you find a home. -can represent the buyer, the seller, or both. -their experience can be quite helpful, especially when making an offer on a house.

real estate agent

cover the cost of renting the apartment again

reletting fee

money paid in advance to cover the cost of excess damage you might cause while living in the house or apartment

security deposit

This is the time when the property is formally sold and transferred from the seller to the buyer and when all closing costs must be paid.

settlement or closing

allows the homeowner to sell the house for less than what is owed on the mortgage

short sale

allowing someone else, not originally on the lease, to live in the home and pay rent

subletting

All the following are mainstream financial service providers except:

title loan lender

something intended to support the current level of living of an individual or household

use asset

The combination of the price paid and the quality of the item purchased

value