Personal Finance - FIN 1100

Which of the following is generally considered to be expensive sources of loans?

Finance companies Bank credit cards Department stores Appliance companies

A married couple that does not talk about money could be

having debt problems

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

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

Lenders can reduce their risk by which of the following?

Large down payment

The new Credit CARD Act requires creditors to include a warning on the monthly statement about making only the minimum ____________.

payment

The Truth in Lending law of 1969 requires lenders to state the cost of borrowing as a specific ______________ amount so that consumers know exactly what the credit charges are. This is a one-word answer.

dollar, currency, monetary, cash, or $ (all are acceptable answers)

Most credit cards do not have a grace period on cash advances which means:

you owe interest for every day until you repay the advance

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

false

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 interest rate on cash advances is often _________, than the rate on purchases. This is a one word answer.

higher, greater, bigger, larger, or more (all work as answer)

You agree to pay a bank discount rate of 6% on a $1000 loan. How much will you receive from the bank when you sign the papers and receive the funds?

$940

True or false: Family loans are simple arrangements and can benefit both parties and no documentation is recommended.

False

True or false: Only about one million Americans belong to credit unions.

False

True or false: The two types of credit are closed-end and free credit.

False

It is said that the least expensive way to borrow is when you borrow on the value of a financial asset. Which of the following loans would meet that test?

Life insurance cash surrender value loan Certificate of deposit loan

Which of the following best explains the flaw in the strategy of borrowing from a finance company?

When you are denied credit from traditional sources, you probably have less ability to afford the higher rate a finance company charges.

Tax refund loans are a(n) ____ way to borrow money in case of a cash shortfall.

expensive

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

grace period annual fees variable rate information APRs

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

minimum monthly payment

After Chapter 13 bankruptcy, some people find obtaining credit ______.

more difficult

Passbook loans are offered by

commercial banks

In a straight bankruptcy, many but not all _______ are forgiven.

debts, liabilities, debt, obligations, or obligation (all are acceptable answers)

A husband buys a car without consulting his wife, and the wife in turn purchases expensive jewelry. This is an example of using money to punish.

true

Finance charges can push a family over the edge of their ability to pay, especially when borrowing from one company to pay another.

true

True or false: The purpose of the Truth in Lending law of 1969 was to give consumers the information needed to compare credit costs on various loans.

true

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

true

The person who distributes the money to creditors is the

trustee

A simple interest declining balance loan has the following terms: 8% annual interest rate, $2,000 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?

$1,080 and $1,040

What would be the interest cost (simple interest) for a $3,000 loan with a 8% rate for nine months of a year?

$180

Which of the following best explains why credit cards are more dangerous than installment loans?

A credit card is easier to use than taking out an installment loan.

An example of a travel and entertainment card is:

Diners Club

The costs to Chapter 13 bankruptcy include:

court costs attorneys' fees trustees' fees and costs

Cash advances are obtained through your card at a bank or through an ATM machine. This is a one word answer and found in the discussion of cash advances. This is a one word answer.

credit

Consumer finance companies do not offer

credit card loans

The most commonly purchased type of credit insurance is

credit life insurance

The three types of credit insurance are:

credit property credit accident and health credit life

If you cannot make a payment on a debt when due, contact the _______ at once to work out a modified payment plan. This is a one word answer.

creditor

Shopping for credit can easily be done by

doing an internet search

Long-term financing is more costly than short-term financing because of higher _________ costs.

interest

The rule of 78s formula favors ____.

lenders

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

less

The interest rate on cash _________ is often higher than the rate on purchases.

loan

The interest rate on cash _____________ is often higher than the rate on purchases.

loan

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

passbook

One reason some people use payday loans is that

they are convenient

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

trustee

Long-term financing is more costly than short-term financing because:

you will pay more in interest charges

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

loans

True or false: Most credit card companies do not charge a fee when a cash advance is made.

false

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

funds

Which of the following are signs of possible debt problems?

using up savings having little in savings getting a credit card revoked borrowing money to pay old debts

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

What is the best strategy if you can't make a payment on a debt?

Notify the creditor as soon as possible in an attempt to work out a modified payment plan.

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

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

Which of the following are advantages of borrowing from a credit union?

Personalized service Patient with borrowers

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

Second mortgages Credit cards Passbook loans

Which of the following types of loans are offered by consumer finance companies?

Second mortgages Personal installment loans

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

does not apply

Young people who make purchases on credit for possessions that took parents years of hard work and savings is an example of using credit to have deferred comfort.

false

Cash advances require that you pay a transaction _________

fee

Most credit cards carry a special __________, based on the percentage of the amount borrowed, that is applied when a cash advance is taken out. This is a one-word answer.

fee

CCCS counseling is usually

free

The emotional desire for instant _____________ can add to a person's debt burden as impulsive purchases of expensive items are financed with debt, such as credit card or bank loans.

gratification, satisfaction, fulfillment, or comfort (all are acceptable answers)

Payday loans are {inexpensive or expensive} although readily available via check cashers, finance companies, and other sources.

inexpensive

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

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

more

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

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

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

petition

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

plan

Simple interest (I) is calculated as follows: ___________ X Rate of Interest X Time. This is a one word or one letter answer.

principal or P (Both answers work)

Most automobile financing agreements permit your creditor to ____________ your car anytime you are in default on your payments.

reposses

One possible reason for indebtedness among young people is the desire to use credit to live at a level that may have taken their parents years to achieve.

true

A $1,000 loan that uses add-on interest has the following terms: 8%, one year, two payments: one in 6 months and one in 12 months. What is the amount of each of these payments?

$540

What would be the interest cost (simple interest) for a $2,000 loan with a 6% rate for a Half of a year?

$60

Why are investors willing to pay a higher rate on loans when increased inflation is expected?

Because they expect inflation to enable them to repay the loan with cheaper dollars.

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

Cash value of whole life

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

Although credit counseling is often free, some agencies will charge a set-up fee. Which of the following is a likely set-up fee for credit counseling?

$10

If you borrow $200 and it cost you $22 in interest with a service charge of $5, what is the finance charge?

$27

Credit cards are convenient, but not always better, to use than installment debt because of the latter's application process and procedures; but that ease of use can lead to overuse.

True

A Chapter 13 bankruptcy plan can be in effect for as many as _____ years.

5

Which of the following statements is true? -Cash advances on credit cards are inexpensive - Credit unions usually charge very high-interest rates on loans - Loans from family members are always inexpensive and have no drawbacks - You must qualify to be a member in order to get a loan at a credit union

You must qualify to be a member in order to get a loan at a credit union

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

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

true

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

true

If you are denied credit by a bank or credit union, you should question:

your ability to afford the higher rate charged by a loan company

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

all or most

Which of the following obligations are not discharged in a Chapter 7 bankruptcy?

Fines Certain taxes Child support Alimony

A $3,000 loan that uses add-on interest has the following terms: 6%, one year, two payments: one in 6 months and one in 12 months. What is the amount of each of these payments?

$1,590

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

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

$1,925

If you borrow $200 and it cost you $27 in interest with a service charge of $6, what is the finance charge?

$33

It is said that the least expensive way to borrow is when you borrow on the value of a financial asset. Which of the following loans would meet that test?

Certificate of deposit loan Life insurance cash surrender value loan

Which of the following loans are offered by credit unions to consumers?

Share draft loans Credit card loans Installment loans

here are several reasons that you should borrow from a credit union, including their patience in dealing with borrowers who have good reasons for missed payments, and they provide _____________ service.

personal, personalized, quality, great, good, customer, caring, or customized (all those answers would fit in the blank)

Looking for credit, aided by Internet searches, is just as important as comparison _________________ for large purchases such as automobile, furniture, or major appliances.

shopping, buying, or purchasing (all are acceptable answers)

Another very expensive way to borrow is a(n) refund loan, which is possibly more expensive than a cash advance on a credit card. This is a one word answer.

tax

If you have funds available on your credit card, you can obtain a cash advance from:

a bank or credit union an ATM

Which of the following are the top reasons why consumers can't pay debts when due?

Keeping up with the Joneses The use of money to punish Finance charges Emotional problems

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

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

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.

True or false: Loans from finance companies and appliance stores tend to be the highest cost loans.

True

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

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 set a consistent due date for each month

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

Installment loans are a cheaper alternative to credit cards because:

their interest rates are often lower than credit card rates they are cheaper over many months or years when an extended payment period is needed