Per Fin 300 Chapter 5

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

$60 [=PxRxT] [=2,000 x 0.06 x 0.50]

Lenders may determine a potential borrower's character by:

Checking the potential borrower's credit report Checking personal or professional references Verifying how long you have been on your current jon

One of the five (5) Cs of credit is _________. This is a valuable asset that can be taken to satisfy a loan obligation.

Collateral

Consumer credit dates back to ___________ times.

Colonial

A line of __________ is the maximum amount of funds lent to a consumer.

Credit

Purchasing equipment "on account" now is using __________ now to pay later.

Credit

Which is true?

Credit is an arrangement to receive cash or goods or service now and pay for them later.

Equal Credit Opportunity Act is designed to:

Ensure that persons are not discriminated against because of their race Ensure that persons are not discriminated against because of sex .... against based upon their age

Examples of protecting against credit card fraud are:

Notify the cc company immediately is your card is lost or stolen Be sure you card is returned after a purchase

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

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

The definition of consumer credit is the use of credit for:

Personal needs, exceeding a home mortgage

Which of the following are examples of a prearranged loan for a specified amount of money that is accessed with special checks?

-A revolving check credit -A bank line of credit

Could adversely affect your financial future

-Buying extravagant items -Eating out instead of saying home

What are the five (5) Cs used by lending institutions?

-Conditions that may affect your ability to pay back the loan - Collateral to pay back loan -Capital to pay back loan -Capacity to pay back the loan -Character to pay back a loan

Negative implications of using too much credit include:

-Default -Bankruptcy -Loss of creditworthiness

What are the three types of closed-end credit?

-Installment sales credit -Single lump-sum credit -Installment cash credit

Deterrents of identity theft

-Keeping checks in safe place -Shredding documents before throwing them away

In straight bankruptcy, many but not all ____________ are forgiven.

Debts

If you purchase a new but defective item that the business will not accept as a return, what does the FCBA say?

The credit card company will allow you to stop payment on such item because it is defective

Simple Interest (I) is calculated: Principal x Rate of Interest x __________.

Time [PxRxT]

Which of the following is an example os using credit to better your life financially?

To attend college

A bank line of credit is also known as:

A revolving check credit

Capacity is borrower's financial ____________ to met the credit obligations.

Ability

How does the Fair Credit Billing Act protect consumer credit ratings?

By allowing consumers to challenge charges that are false and avoid having delinquent charges added to their credit history

What would happen if a Credit Bureau verifies inaccurate information?

If the Credit Bureau is wrong about information, the consumer can sue for actual, possibly punitive damages.

Positive implications of the use of credit include:

Improved credit Increased creditworthiness

A closed-end loan from the bank for personal purposes, home improvements, or vacation expenses is considered ___________ cash credit.

Installment

Conditions, one of the five Cs of credit, refers to the general _________ conditions that can affect your ______________ to repay a loan.

-economic -ability

Complete order to dispute a billing error

1. Write a letter of complaint 2. Pay portion of bill not in dispute 3. Receive an acknowledgment from the credit company 4. Purchase removed or credit issued to account.

When evaluation the 5 Cs of credit, _________ is determined by a borrower's assets or net worth

Capital

What is the trade-off for using credit?

Future Income

What should you do when you receive a phone call claiming to be from your bank?

Hang up, call your local bank, ask if there is something wrong with your account. Go to the bank to verify accounts.

A periodic charge for the use of credit is known as ___________.

Interest

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

Interest

What is the problem with being irresponsible with credit?

Irresponsibility can lead to long-term debt and financial difficulty

The five (5) Cs refer to:

Policies that help determine who will receive credit

The Fair Credit Reporting Act of 1971:

Regulates the use of credit reports, requires deletion of obsolete information, allows access of their files to consumers