Ch 5. Personal Finanance

the general economic CONDITIONS that can affect a borrower's ability to repay a loan

(5C's) Conditions

Collateral

(5C's) a valuable asset pledged to assure loan payments and subject to seizure upon default is called...

local, non-profit organization that provides debt counseling services

A Consumer Credit Counseling Service (CCCS)

a periodic charge for the use of credit

Interest

a line of credit

Karen is notified by her credit card company that credit limit on her credit card has just been increased to $10,000. This is one example of...

interest computed on principal only and without compounding

Simple interest

get credit counseling, declare bankruptcy (as a last resort), contact creditors to work out a plan for payments

What can you do if you are unable to meet your credit obligations?

the percentage costs (or relative cost) of credit on a yearly basis

annual percentage rate

revolving credit

another name for open-end credit is...

true

anyone overburdened by credit obligations can phone, write, or visit a CCCS (Consumer Credit Counseling Service) office

false; expensive - charge high interest rates from 12%-25%

borrowing from car dealers, appliance stores, department stores, and other retailers is relatively INEXPENSIVE

true

consumer credit dates back to colonial time; "limb for limb"

false; honest and responsible

consumer credit works because people by and large are DISHONEST AND IRRESPONSIBLE

true

credit is an arrangement to receive cash, goods, or services now and pay for them in the future

false; usually

credit unions RARELY offer the same range of consumer loans that banks and other financial instituions do

calculated by: dividing monthly debt payments ( not including house payments ) / net monthly income

debt payment-to-income ratio is...

calculated by: total liabilities / networth

debt-to-equity ratio is...

true

if your credit application is denied, the ECOA (Equal Credit Oppurtunity Act) gives you the right to know the reasons

true

in the 5C's of credit, capital refers to your assets or networth

direct loan of money for personal purposes

installment cash credit

loan that allows you to receive merchandise such as a refrigerator or furniture

installment sales credit is...

false; do (society based on consumption - afluenza society)

most economics DO NOT recognize consumer credit as a major force in the American economy

true

perhaps the greatest disadvantage of using credit is the temptation to overspend

Equal Credit Opportunity act (ECOA)

which federal consumer credit law prohibits credit discrimination based on sex and marital status?

Truth in Lending Act or Fair Credit Billing Act

which federal law limits a cardholder's liability for unauthorized use of a card to $50?

Fair Credit Reporting Act (FCRA)

which federal law protects you by requiring credit bureaus to furnish correct and complete information to creditors?

false; closed-end 9(mortgage loans, automobile loans, installment loans)

with an OPEN-END CREDIT, you pay back one-time loans in a specified period of time

true

it is safer to use credit, since charge accounts and credit cards let you shop and travel without carrying large amounts of cash

the smallest amount you can pay and remain a borrower in good standing

minimum monthly payment

the borrower's attitude toward his/her credit obligations

(5C's) character

when a debtor with a regular income proposes a plan for using future earnings or assets to eliminate his/her debts over a period of time

Chapter 13 personal bankruptcy

when an individual is required to draw a petition listing his or her assets and liabilities

Chapter 7 personal bankrupcty

350 to 850

FICO scores generally range from...

National Foundation for Consumer Credit (NFCC)

a Consumer Credit Counseling/Management Service (CCCS or CCMS) is affiliated with the...

A mortgage loan

a good example of a closed-end credit is...

capacity

a loan officer is examining your income and the amount of your existing debt payments in decided whether to make a loan to you today. Which of the 5C's of lending is loan officer most likely looking at?

complete an approved instructional course in personal finance management

the Bankruptcy abuse Prevention and consumer Protectino act requires debtors to...

Fair debt Collection Practices Act (FDCPA)

the federal trade commission enforces the...

false; harder

the new bankruptcy law made it EASIER for consumers to file a Chapter 7 Bankruptcy

true

the three most common types of closed-end credit are installment sales credit, installment cash credit, and single lump-sum credit

finance charge

the total dollar amount you pay to use credit is called the...

paying only the minimum balance each month, missing payments or paying late, using savings to pay normal bills, depending on overtime to meet normal expenses

what are danger signs of potential debt problems?

contact the fraud departments of each of the 3 major credit bureaus, file a police report, contact creditors for any accounts fraudulently opened

what should you do if your identity is stolen?

30 days

when you complain about your billing error, the creditor must acknowledge within ____ days

true

you may not be denied credit because you receive Social security of public assistance