Personal Finance Chapter 6

Kinds of credit cards

-bank - T&E -gas

Difference between sales finance company and a personal finance company

-buy directly from personal finance -buy something and sell it to someone else

Wage garnishment

25% of take home pay ($1000@25%=$250)

The____is the cost of credit on a yearly basis, expressed as a percentage

Annual percentage rate

The total dollar amount a person pays to use credit is the ____

Finance charge

Fair credit reporting act

You have the right to know what's in your file and who has seen it

___a loan means agreeing to be responsible for loan payments if the borrower fails to make them

co-signing

An arrangement to receive cash, goods, or services now and pay for them in the future is called _____

credit

Credit laws

*chapter 7- liquidation(bus.) *chapter 11- reformation (comp.) *chapter 13- bankruptcy (wage)

The three C's

*character- history of your credit contracts (what you have done in the past) *capacity-how you are going to pay back your job *capital- a lender will want to know if you have valuable assets

Two most important things you need to know on your credit contract?

-APR -interest rate

Acceleration clause

A contract that allows a lender to require a borrower to repay a loan

Balloon note

A mortgage that has one large payment due upon maturity

Promissory note

A signed document containing a written promise to pay a stated sum to a specified person

Which of the "five Cs of credit" does your income affect? A. capacity B. character C. collateral D. credit history

A. capacity

Under the equal credit opportunity act, you may sue a creditor if the creditor A. discriminates against you B. fails to disclose information C. gives inaccurate information D. hires a collection agency

A. discriminates against you

Chapter 7 bankruptcy relives an individual from debts arising from A. alimony B. credit card charges C. child support D. fraud

B. credit card charges

The periodic charge for using credit is called A. financing B. interest C. installment payments D. a credit limit

B. interest

The usual trade-off of choosing small payments is A. having a short period to pay B. paying more in interest C. having variable interest rates D. pledging collateral

B. paying more in interest

No matter how often you make payments, interest is calculated on the full amount of the original principal with the A. simple interest method B. declining balance method C. add-on interest method D. up-front cash method

C. add-on interest method

Which law gives a borrower the right to stop payment? A. equal credit opportunity act B. fair credit reporting act C. fair credit billing act D. truth in lending act

C. fair credit billing act

You will probably find the least expensive loan from A. a commercial bank B. a finance company C. family members D. a home equity loan

C. family members

A one-time loan that is paid back over a specified period of time and in payments of equal amounts is called____

Closed-end credit

Two important dates

Closing date- last date by which something must be submitted Due date- date due at the credit card comp

The use of credit for personal needs is called____

Consumer credit

Open end credit

Continually (credit card)

Credit card vs. Charge

Credit card you can use anywhere, while charge card is only good at one store

The legal process in which some or all of a debtor's assets are distributed amount creditors because the debtor cannot pay his or her debts is called A. debt collection B. credit counseling C. adjusted repayment D. bankruptcy

D. bankruptcy

The greatest disadvantage of using credit cards is A. having a record of expenses B. being in physical danger C. proving to be a responsible spender D. being tempted to overspend

D. being tempted to overspend

Closed end credit

Installment loan (house and car)

Add-on interest

Interest payable is determined at the beginning of a loan and added onto the principal

The maximum amount of money that a creditor makes available to a person is the _____

Line of credit

The smallest amount a borrower can pay on a credit card bill and remain a borrower in good standings is the____

Minimum monthly payment

___ is computed only on the principle

Simple interest

The condition of being deeply in debt is called___

indebtedness