Mrs. Kirby Test 2

Interest will usually begin to accrue immediately when you use a bank credit card to:

get cash advances

A legal claim that allows creditors to liquidate loan collateral is a:

lien

Any credit card purchase will effectively be an interest-free loan if you:

pay off the entire balance on or before the due date

Borrowing from _________ is seldom recommended by financial advisers.

relatives

If the add-on method is used to calculate a finance charge of $150.80 on a $2,200 loan, the amount to be ___________.

repaid is $2,350.80

If you are expecting difficulties in making your payments, it is recommended that you _____________.

talk to the creditors

It is better to use your savings instead of borrowing to make a purchase when:

the cost of borrowing is greater than the interest earned on savings

A loan rollover means that:

the loan is paid off by taking out another loan.

When comparing two installment loans with the same principle and annual percentage rate (APR), the loan with the ____________.

the longer maturity will have the lowest monthly payment and the higher total costs.

A single-payment loan

usually matures in one year or less

The rate of interest charged on _______ loans charged periodically in keeping with prevailing market conditions.

variable-rate

Jenny's monthly take-home pay is $5,000 and her total monthly payments are $1,000. Which of the following is Jenny's debt safety ratio?

20%

Most of your debts would be totally discharged under chapter _____ of the federal bankruptcy law.

7

A proper use of open account credit would be to buy________.

a washing machine

When the simple interest method is used to determine finance charges, the interest is calculated based on the

actual balance of a loan

You want to borrow $1,000 at an interest rate of 10%. The most expensive method of calculating the dollar cost of the interest on this installment loan will be the:

add-on method

If a loan has prepayment penalty, there will be:

an additional cost to repay the loan early

Which of the following calculation methods would produce more interest cost for a person who uses his or hers credit card frequently?

average daily balance including new purchases

Which of the following sources of consumer loans often has the most favorable terms for borrowers?

credit union

a payment made using ___ is equivalent to paying by cash

debit card

Which is the following is true of loan maturity?

the shorter the loan maturity, the higher the monthly payments