Personal Finance Chapter 7

A simple interest declining balance loan has the following terms: 8% annual interest rate, $3,000 loan, 2 payments: one at the end of the first half year and the last payment at the end of the second half year. What would be the amount of these two payments?

$1,620 and $1,560

Most credit card companies do not charge a fee when a cash advance is made.

False

Only about one million Americans belong to credit unions.

Flase

A married couple that does not talk about money could be

Having Debt Problems

Interest Rate

I=P × r × T

A credit counseling organization usually provides credit management classes and helps you devise a credit management

Plan

The Fair Debt Collection Practices Act prohibits certain practices by agencies that collect debts for creditors.

True

The pros and cons of T&E credit cards, such as American Express, include:

annual fees are typically high no finance charge is incurred as full payment of the balance owed is due each month full payment is due each month

The two major categories or types of credit are---- -end and open-end credit.

closed

Passbook loans are offered by

commercial banks

The costs to Chapter 13 bankruptcy include

trustees' fees and costs attorneys' fees court costs

The costs to Chapter 13 bankruptcy include:

trustees' fees and costs attorneys' fees court costs

Family loans are simple arrangements and can benefit both parties and no documentation is recommended.

False

On a discount loan of $2,000 with $75 interest, how much will you receive for loan proceeds?

$1,925

APR

=(2 × n × I) / [P × (N + 1)]

Before you borrow money you should ask yourself if you need a loan, if you can -------the loan, and if you can qualify for a loan.

Afford

If you cannot make a payment on a debt when due, contact the---- at once to work out a modified payment plan.

BAnk

Which of the following types of loans are offered by life insurance companies?

Cash value of whole life

The most commonly purchased type of credit insurance is

Credit Life Insurance

An example of a travel and entertainment card is:

Diners Club

Each 1% increase in the---- rate means a decrease of approximately 1% in the quantity of goods and services you can purchase with a given amount of money.

Inflation

One of the intangible costs of bankruptcy is the difficulty obtaining----in the future.

Loans

Sharon has been taking out student loans to finance her college education. She has amassed a great deal of debt, but plans to declare Chapter 7 bankruptcy to have the debt forgiven. Will her strategy work?

No; student loans are not forgiven in Chapter 7 bankruptcy

In Chapter 7 bankruptcy, a debtor is required to draw up a _____ listing his or her assets and liabilities.

Petition

Which of the following items of income and value are protected under a Chapter 7 bankruptcy?

SS payments and unemployment compensation Equity in cars Equity in home Household appliances Trade tools

Which of the following loans are available to consumers through commercial banks?

Second mortgages Passbook loans Credit cards

Which of the following is true about a repossession and the borrower's responsibilities after an auction sale of the vehicle by the bank?

The borrower owes the difference between the sale price and the unpaid debt plus legal, towing, and storage costs.

In a Chapter 13 bankruptcy, the debtor normally keeps _____ of the property.

all or most

CCCS counseling is usually

free

The two main activities of the CCCS are:

helping families with debt problems by helping them manage debts teaching families how to avoid heavy debt burdens in the future

The rule of 78s formula favors

lenders

Credit offered by car dealers is generally ___ expensive than most other car loans.

less

Family members may only charge interest they would have earned on the money if they had deposited it in a ______ account.

passbook

The trustee's role in a Chapter 13 bankruptcy involves distributing----- to creditors.

payments

The major provisions of the Credit Card Accountability, Responsibility, and Disclosure Act of 2009:

set a consistent due date for each month state that a teaser rate must be good for at least six months limits the issuer's ability to increase the interest rate in the first year

Credit offered by car dealers, such as financing through ______, may be less expensive than banks, but the downside is that the car dealer may be less willing to discount the price.

the General Motors Acceptance Corporation or Ford Motor Credit Corporation

Some credit card holders make the minimum payment to remain in good standing without making progress on reducing the outstanding balance. This is referred to as the minimum monthly payment

trap

The key pieces of information that credit card issuers must provide are:

variable rate information annual fees grace period APRs

Paying the _______ makes your credit card purchases much more expensive, especially at high interest rates.

minimum monthly payment.

Credit life insurance is generally ____ expensive compared to equivalent term life insurance.

more

Credit card issuers must provide certain information to consumers, including:

How to avoid paying interest Minimum interest charge, setup and maintenance fees APR for purchases, balance transfers, and cash advances Penalty APR and when it applies

Annual finance charge

Interest + Other costs

Lenders can reduce their risk by which of the following?

LArger down payment

Simple interest (I) is calculated as follows: Principal X Rate of Interest X

Time

Loans from finance companies and appliance stores tend to be the highest cost loans.

True

Most automobile financing agreements allow the lender to repossess your vehicle when you are in default on your payments.

True

The overindulgence of children can cause debt problems.

True

The rule of 78ths is a mathematical formula to determine how much interest has been paid at any point in a loan.

True

The costs of Chapter 13 bankruptcy include court costs, lawyer fees, and

Trustees fees

Consumer finance companies do not offer

credit card loans

A car is repossessed by a bank. The borrower owed $4,000 on the car. At an auction, the car is sold for $3,000 and the bank incurred a $150 towing charge. How much, if anything, will the borrower owe after the sale at auction?

$1,150, which is the unpaid loan balance and the towing charge

APR

=Annual finance charge / Principal borrowed

Total amount due

=Principal borrowed + Interest

Amount saved

=Regular price − Total cost

Finance charge for June

=[Beginning balance + Ending balance) / 2] × (Annual interest rate / 12)

Credit card issuers must provide certain information to consumers, including:

APR for purchases, balance transfers, and cash advances Penalty APR and when it applies Minimum interest charge, setup and maintenance fees How to avoid paying interest

The creditor in a Chapter 13 bankruptcy proposes a plan to pay off debts from future earnings over a period of time.

False

The three types of credit insurance are:

credit property credit life credit accident and health

In a straight bankruptcy, many but not all--- are forgiven

debts

The Fair Debt Collection Practices Act ______ to creditors that collect debts themselves.

does not apply

Which of the following are ways to lower lender risk and therefore lower the cost of borrowing?

Choose variable interest rate Make a larger down payment Only create short-term payments (lower rate and higher payments) Secure a loan by property or another asset