Unit 3 Personal Finance
Amara has taken out a fixed rate mortgage for $125,000 at 4.04% for 20 years, or 240 months. Her payments are $730. What is the total cost of the loan?
$175,200
Duncan is considering a loan to purchase a car. He has saved $1,000 and is considering a used car that costs $8,000. The sales tax rate is 8%, and the fees are $450. How much will Duncan need to borrow?
$8,090
What is the periodic interest on a credit card with a 17.99% APR
1.499%
Tasha has two credit cards with low balances. She uses them for groceries and entertainment and pays them off in full when they are due each month. What could be a future consequence of this behavior?
A higher credit score
What will most likely cause a lender to deny credit?
A historic credit score of 300
Priscilla has been a financial advisor for five years and is now applying for a job at a new investment company. What might be an important factor for the new company to consider from her application?
A historical long-term FICO score between 700 and 800
What asset might a bank use as collateral for a mortgage?
A house
Stella and Jonathan have been paying their 30-year mortgage since they bought their home two years ago. This year, they want to go on vacation and are considering skipping two payments to pay for their vacation instead. What could be a future consequence of this behavior?
A lower credit score
Who would best benefit from counseling?
A person with a debt-to-income ratio of 29%
Gina made a down payment on a motorcycle. What incentive did she have for making a down payment?
A reduced time in debt
Which individual is the best candidate to be approved for a loan?
An individual with excellent credit, steady income, and stable employment
Which type of bankruptcy allows a judge to adjust debts through elimination and reduction based on a person's income?
Chapter 13
Which type of bankruptcy will affect a person's credit score for seven years?
Chapter 13
Which of the following can help consumers with excessive debt renegotiate a more convenient payment plan with their creditors?
Credit counseling services
Which of these might decrease the length of a mortgage loan?
Down payment
From which organization can you request free information about your credit score?
Equifax
Elysha has a monthly gross income of $3,000 and a monthly debt load of $500. How can her debt-to-income ratio be classified?
Goodbetween 15 and 20 percent
Oscar received his credit report and sees that his VantageScore is 400. Which factor could be the cause?
He has five credits cards with high balances.
Carolina accepted her first job and moved out of her parents' house and into an apartment. What is most likely to be important from now on to keep her credit healthy?
Her rental history
Which section of a Schumer Box discusses the grace period?
How to Avoid Paying Interest on Purchases
Which type of credit is usually used for cars, mortgages, and student loans?
Installment credit
Frank works for a nutrition counseling company and is now being considered for a promotion. Why might his employer request to check his credit history?
It might be negative for the company to promote a person with large unpaid health-related bills.
Why do smart consumers often make a down payment when using credit to purchase a good?
It reduces the interest paid to finance the good.
What is most likely to cause a lender to deny credit?
Missed payments on revolving credit
Martha wants a prepaid credit card to pay for her college expenses. What is true?
She can replenish this secured card when it runs out of funds.
Martha received her credit report and sees that her FICO score is 350. Which factor could be the cause?
She filed for bankruptcy last year.
Trina applied for a new credit card with an introductory APR offer of 7.99% or 8.99%. What will most likely happen in the second year?
The APR will increase quite substantially.
Which federal legislation prohibits credit card companies from raising rates on existing balances?
The Credit Card Accountability Responsibility and Disclosure Act
Which federal legislation requires lending companies to notify consumers of changes in rates and fees?
The Credit Card Accountability Responsibility and Disclosure Act
Patrick's lease is ending soon, and he wants to rent at a different apartment complex. He wants to be sure his own history as a tenant is accurate. What legislation can he use to protect himself in that regard?
The Fair Credit Reporting Act
Which federal legislation protects consumers from harassment by debt collectors?
The Fair Debt Collection Practices Act
If Mark wants to apply for a loan, which federal legislation can he research to make sure his bank is honest with him?
The Truth in Lending Act
Jim and Jennifer have excellent credit, and they purchased property with a mortgage. However, they experienced financial difficulty and missed more than three months of payments. Which of the following is the most probable consequence of Jim and Jennifer's late payments?
The bank could repossess the property.
Jim and Jennifer have excellent credit, and they purchased property with a mortgage. However, they experienced financial difficulty and have not made any payment in over six months. Which of the following is the most probable consequence of Jim and Jennifer's late payment?
The bank will repossess the property.
What is likely to happen if a borrower misses a payment on a credit card account?
The credit card company applies a penalty rate, increasing the card's interest rate.
What is likely to happen if a borrower does not pay a mortgage for an extended period of time?
The home would be foreclosed on.
Peter, who is 30 years old and has a job, wants to pay for his car with a loan. What is true?
The vehicle is the collateral of this secured loan.
How do consumer credit counseling services help individuals with excessive debt?
They negotiate with creditors to reduce interest rates and fees.
Matt got approved on a deferred private student loan that will be due for repayment after graduation. What is his incentive to start paying it now if he can?
To avoid or to lower compound interest
Marisa and Tom are ready to purchase a home. Why is it important for them to check the information recorded on their credit reports?
To verify the accuracy of their credit score for interest purposes
Which type of credit card carries the most risk
Unsecured with variable interest rate
An unsecured loan
is not connected to collateral and, therefore, a higher risk for lenders