personal finance chapter 7

chapter 7 straight bankruptcy

must pass a means test and is a more severe type. no possibility of repaying debts, and are given the opportunity to eliminate them and start again. you will have to sell a good portion of your assets.

installment or amortized loan

loan that calls for repayment of both the interest and the principal at regular intervals, set in such a way that the loan expiers at a present date. common, used to finance cars

insurance agreement clause

loan that requires a borrow to purchase credit life insurance that would pay off the loan in the event of a borrowers death

single payment or balloon loan

loan thats paid back in a single lump-sum payment at maturity or the due date of the loan which is usually specified in the loan contract. pay back all borrowed plus interest at that date

fixed-interest rate loan

maintains a single interest rate for the duration of the loan

deferment

ability to postpone your student loan payment for up to three years while enrolled half time in school, unemployed, or meet hardship standards

security agreement

agreement that identifies whether the lender or borrow retains control over the item being purchased

debt resolution ratio

consumer credit should be short-term. if it lasts over 4 years its not short term.

recourse clause

defines what actions a lender can take to claim money from you in case you default. a certain portion of your salary would go directly to the lender to pay off your debt

default

failure of a borrower to make a scheduled interest or principle payment

note

formal document that outlines the legal obligations of both the lender and the borrower

secured loan

guranteed by a specific asset. if you cant make loan payments, that asset can be seized and sold to cover the amount due. if you borrow money for a car and cant make the payments the car will act as collateral and will be repossessed.

prime rate

interest rate banks charge to their most creditworthly customers.

consumer loan

involves a formal contract that detials exactly how much youre borrowing and when and how youll pay it back

unsecured loan

requires no collateral. large unsecured loans are only given to people with excelled credit bc the only security the lenders have is the individuals promise to pay. They're quite expensive

repayment plans

standard repayment- 10 yr term automatic, pay the lowest amount of interest extended repayment: 10-30 yr, additional number of payments and interest paid income-based repayment: based on percentage of discretionary income, not the amount owed, 25 yr payments until loans forgiven graduated repayment-starts low and monthly payment increases every 2 yrs, 25-30yr before loan forgiveness

deficiency payment clause

states that if you default on a secured loan, the lender can repossess whatever is secured and you will be billed the difference if the sale doesnt cover what you owe

acceleration clause

states that if you miss one payment, the entire loan comes due immediately.

forbearance

stop making student loan payments temporarily for qualified reasons such as illness, financial hardship, or serving in a medical or dental internship or residency.

adjustable interest rate loan

tied to a market interest rate. interest rate you pay varies as that market rate changes.

consumer debt limit ratio

total monthly nonmortgage debt payments/total monthly take-home pay