personal finance 5-8

what are the side effects of irresponsible use of debt?

financial buddens

disadvantages of rent-to-own contracts?

higher price tag, more fees

In a private sale of a vehicle, what are some of the things you need to do before completing the sale?

Check VIN, registration, and clean title. Also check out the buyer

what can you do to protect yourself against identity theft?

Check your financial statements, monitor your credit report, do not give out personal information, buy a shredder, and use mobile payment apps. It is also important to empty your wallet, lock it up, protect your mail, cell phone security, secure your computer, protect your PIN, don't allow skimming, and freeze your credit report.

What selection criteria should you use when buying a home?

Consider price range, house style, number of beds/baths, lot size, and location.

What is an advantage of a fixed-rate/fixed-term mortgage?

There is predictability, lending for easier budgeting and forecasting. There is also lower risk, and protection against volatile interest rates.

credit card act of 2009

Those under 21 must show evidence of income or have an adult cosigner to be able to get a credit card. The Act prohibited credit card companies from encouraging college students to apply for a credit card.

When can you request to have PMI dropped?

When you have reached the date when the principal balance of your mortgage is scheduled to fall to 80% of the original value of your home.

What options do you have if you find an error on your credit report?

You can contact the credit bureau in writing, including copies of all documentation. The credit bureau will investigate the error within 30 days.

why is a payday or title loan considered predatory lending?

A payday loan is a loan that uses deceptive means to convince the loaner to accept a loan under unfair terms. It imposes unfair loan terms on borrowers.

What can you do to improve your credit score?

1. Get copies of your credit report and verify the information 2. Pay your bills on time 3. Understand how your credit score is determined 4. Learn the legal steps to take to improve your credit report 5. Beware of credit-repair scams

People with the best credit have a utilization rate of no more than

30%

FICO score range

300-850

unsecured credit card

A type of credit card that doesn't require you to deposit money into a bank account in order for you to get a credit card.

secured credit card

A type of credit card that requires the borrower to pay the company a fixed, up-front amount of money as collateral, which becomes the credit limit of the card, thereby making it low-risk to the credit card company

advantages and disadvantages of credit

Advantages: buying bigger purchases is easier, helps your credit score and get you loans easier Disadvantage: go into debt or identity theft

sublease

An agreement to rent out a portion/all of the property towards another tenant.

Three national credit reporting agencies

Experian, TransUnion, Equifax

equity

Market value of home minus what is owed on home.

Why would a lender require you to have private mortgage insurance (PMI)?

Private mortgage insurance protects the mortgage lender in case of borrower default.

advantages and disadvantages with private student loans?

Private student loans are made to student or to parents. One reward is that there are higher borrowing limits and usually a quick application. However, there are no loan forgiveness options and higher interest rates. What options do you have for managing t

What role does a realtor have in brokering the sale of a home?

Realtors are responsible for mentoring and assisting real estate salespersons with their transactions, help sellers prepare a home for sale, and oversee contracts and buying agreements.

Describe one of your "hopes" with a balloon-payment mortgage?

The hope is to pay off all or most of the house before the low or no monthly payments increase.

What precaution do you need to take if you choose to use a home equity loan for debt consolidation purposes?

The major issues is that you are turning unsecured debt into secured debt, so it is vital to make the payments and not run up new debt.

define closing

The salesperson asks the customer for commitment

What are advantages the authors discuss in regards to adjustable-rate mortgages (ARMs)?

There are lower initial rates, leaving for a bigger home buying budget. This results in short-term affordability, and often lower monthly payments.

Why should you be careful in regard to the kinds of things you choose to purchase with a credit card?

There are various pitfalls and dangers to using a credit card. For one, overspending becomes a serious issue with a credit card. Credit card fraud is also an ever present risk.

When does it make sense to refinance your home?

When you can qualify for a low enough interest rate to save money over the life of your loan.

mortgage

monthly payment on your house after principal

what is the most you should carry as a balance on a credit card?

no more than 30% of your balance

What are the advantages of buying a used automobile?

often lower price, sellers open to negotiation

what should you carry in your wallet?

only important ID and debit cards

how can you help keep your credit card interest rate and fees low?

pay your debts on time

why is it important to establish a credit record?

reflects a good credit score and allows. you to qualify for lower interest rates and fees

another name for an unsecured loan

signature loana

perma-debt

the condition of having an outstanding balance on credit cards that is barely reducible over time because one is able to make only the minimum payments and is being charged a high annual rate

what should you watch for on 0% credit offerings?

the fine print

how is a debt to income ratio used

view of your monthly finances

what are advantages to using credit cards?

-more convenient -can track online spending -buyer protection (less likely to be subject to online scams) -can be replaced if lost/stolen -good credit history can make it easier to obtain a loan/mortgage

Why are "0% interest" and "$0 down" offers not always the best deals?

0% interest doesn't last forever, the interest will come back and often will be very high.

Explain what are the five most important indicators that impact your FICO score.

1. Types of Credit: credit cards, loans 2. History of timely payments: whether or not you are making credit card payments or loan payments on time. 3. How much you owe relative to your available credit: strong credit users keep this under 30%. 4. Length of credit history: how much information lenders have to pull that prove you are a strong loan candidate. 5. New credit

how long will a late payment incident stay on your credit report

7 years

credit

A contractual agreement where a borrower receives something now and makes an agreement to repay the lender in the future, usually with interest attached.

why is a co-signer sometimes required?

A cosigner may be required if the borrower is unfit to take a loan by themselves. This could be because of their credit score, any of the 5c's, previous bankruptcy, among many other things.

identity theft

A crime that involves someone pretending to be another person in order to steal money or obtain benefits

Where can you securely check your credit report and credit score?

AnnualCreditReport.com

What should you do if you have a credit score below 600?

At a credit score below 600, you would be paying high interest rates for the very limited loans available to you. It would be important to work on getting this score up, by paying off any loans you may have such as credit cards and by making your payments on time in the future.

What are the advantages of buying a new automobile?

Brand new, often more reliable, can track the service history

What are the advantages of leasing (rather than buying) an automobile?

Can be cheaper, as you are just paying for depreciation

What are the advantages of renting?

Easier to move, someone else is responsible for the repairs, there are no unexpected repair bills, property tax or homeowners' association fees. There is also no homeowners insurance, no risk of losing money if the market declines, low initial cost, and you possibly may not have to pay utilities.

What steps should you take if you become a victim of identity theft?

File a claim and notify your credit/debit card company of your stolen identity. File a report with the FTC, and contact your local police department.

How do people typically use a home equity loan?

Funding a student loan, paying off credit card debt, funding a vacation, or starting a business.

What are the advantages of buying your own home?

Gain equity as you pay down mortgage, the value of the house could increase, personalization of space, the eventuality of living payment-free, can get second mortgage home equity loans, can provide advantages on the interest and property taxes you pay.

What steps can you take to build your credit rating as you enter the independent life stage?

Get a secured card, become an authorized user, repay your auto or home loans.

What kinds of home equity loans exist?

HELOC, fixed-rate/fixed-term loan, and balloon-payment loan.

Of the five, which two has the most impact on your FICO score? Why?

History of timely payments and how much you own relative to your available credit. These two have the most impact because they reflect how strong of a credit owner you are.

How do you determine how large an auto payment you can afford?

Ideally, you can afford what you can pay cash. However, it is important to keep your debt-to-income ratio below 36% and calculate affordable monthly auto payments. Another mindset is the 1/10th rule, or spending no more than 10% of your gross annual income on the purchase price of a car.

describe some of the closing fees

Loan application fee, loan origination fee, points, credit report fee, appraisal fee, home inspection, title search and title insurance.

process of deferment

Loan deferment is a policy where you can delay your loan payments for a specific amount of time without incurring fees. You will have to speak to whomever lent your loan and explain your situation and why you need the loan deferred.

How can you make sure you are treated fairly if you decide to complete a trade-in?

Make sure you are knowledgeable on what your car is worth and the worth of the car you are trading in

what types of information can you find on a credit report

Name of creditor, address, phone number, and account number, type, terms, and monthly payments, open date, date last reported, credit limit or original amount and high balance, recent balance and required payment, comments, payment history, bankruptcies.

formula for calculating your loan payment

PVA = PMT[1-(1/(1+r) n)/r] x (1+r)

alternatives to a payday or title loan?

Payday alternative loans from a credit union, credit cards, borrowing from family or friends, personal loans.

During the Great Recession, what happened to people with ARMs?

People with ARMs were forced to pay interest rates up in the double digits.

what are the three things you need to complete before you sign and enjoy your new ride?

Perform a final inspection, sign paperwork, and transfer your title. Also, call your insurance agent.

what steps can you take to remedy an error on your credit card statement?

You can contact the credit card company in writing so long as it is within 60 days after the statement date on the bill. This includes sending a letter to "billing inquiries", including name, account number, the error and why it is an error, and the date of the error.

What options do you have for managing the repayment of your student loans?

You can pay more than the minimum monthly payment, stick to a budget, consolidate loans and look if you qualify for loan forgiveness.

what are some things to consider for your needs when you are shopping for a vehicle?

You need to consider aspects like gas mileage, all-wheel-drive, size, passengers you need to transport, cargo, and climate you are driving in. It is also important to consider price, monthly payments, and interest.

What is your monthly vehicle payment dependent upon?

Your monthly income

FICO credit score

a credit score method that reflects your credit risk based on a snapshot of your credit report at a particular point in time

how do grace periods work?

a grace period is the time you must pay your bill before finance charges are activated.

subsidized student loans

a loan on which interest is not charged until the student graduates

unsubsidized student loans

a loan that starts charging interest from the time the loan is made

phishing

a technique to gain personal information for the purpose of identity theft, usually by means of fraudulent e-mail

what is considered a good FICO score

anything above 640

the 5C's of credit decision

character, capacity, collateral, capital, conditions

skimming

double-swiping a credit card in a legitimate terminal or covertly swiping a credit card in a small, hidden, handheld card reader that records credit card data for later use

why is there a variability in the interest rate charged to different credit customers?

each customer is in a different financial situation

how do you establish a credit record?

getting a secured credit card