Personal Finance Ch. 6
T or F: Bankruptcy should be used as a last resort
TRUE
the greatest disadvantage of using credit cards is
being tempted to overspend
what steps could one take to increase their chances of obtaining a loan?*
build a good credit score put up collateral big down payment make a shorter loan period variable interest rate
which of the "five C's of credit" does your income affect?
capacity
a form of security to help guarantee that the creditor will be repaid
collateral
arrangement to receive cash, goods, or services now and pay for them in the future
credit
Chapter 7 bankruptcy relieves an individual from debts arising from
credit card charges
a measure of a person's ability and willingness to make credit payments on time
credit rating
an entity that lends money
creditor
under the Equal Credit Opportunity Act, you may sue a creditor if the creditor
discriminates against you
if net income is $800 what is the max one should use on debt payments?
$160 a month or less
which law allows a borrower to sue a creditor or credit bureau that verifies incorrect data about his or her credit history?
Consumer Credit Reporting Reform Act
credit as a one-time loan that you will pay back over a specific time in payments of equal time
closed-end credit
a loan means that you agree to be responsible for the loan payments if the other person fails to make them
consigning
List the disadvantages of using credit*
credit costs money temptation to buy more than you can afford could lose some of your income and property if you do not pay credit bills on time doesn't increase your total purchasing power
you will probably find the least expensive loan from
family members
the total dollar amount you pay to use credit
finance charge
a time period during which no finance charges will be added to your account
grace period
what does the Consumer Credit Counseling Service offer?
help you understand and analyze your finances it is for anybody
the periodic charge for using credit is called
interest
what do commercial banks and finance companies both do?
lend money for profit organizations
List the advantages of using credit*
lets you enjoy goods and services now and pay for them later allow you to combine several purchases making one monthly payment makes it easier to shop online allows you to travel without carrying a lot of cash creditors can view you as a responsible person
how might someone obtain a low interest rate and make low monthly payments?
low interest from a collateral down payment extend the length of the loan
credit as a loan with a certain limit on the amount of money you can borrow for a variety of goods and services
open-end credit
how might you prevent a thief from stealing personal credit information from your trash?
shred everything go online; paperless
the interest computed only on the principal, the amount that you borrow
simple interest
the use of credit for personal needs
consumer credit
the maximum amount of money a creditor will allow a credit user to borrow
line of credit
someone signed a contract to pay for something in 6 equal installments... what type of consumer credit is this person using?
Installment Closed-End Credit
no matter how often you make payments, interest is calculated on the full amount of the original principal with the
add-on interest method
the cost of credit on a yearly basis, expressed as a percentage
annual percentage rate (APR)
what five C's of credit would someone that has paid for two trucks in cash have and which would they not? what questions is a creditor likely to ask them about the other 5 C's?
have: collateral not: credit history Income source? How long have you worked? How much is in your savings?
which law gives a borrower the right to stop payment?
Fair Credit Billing Act
the legal process in which some or all of a debtor's assets are distributed among creditors because the debtor cannot pay his or hers debts is called
bankruptcy
what seven question should one ask themselves when deciding whether or not to finance a purchase?
book... can I afford it? how much is in my savings? what is the cost of credit?
contrast borrowing from a commercial bank and a finance company*
commercial banks: costumers with established credit collateral larger loan amounts repayment based on use of loan credit rates vary based on 5 C's long detailed application could take several days
the smallest amount you can pay and remain a borrower in good standing
minimum monthly payment
the income you receive (take-home pay, allowance, gifts, and interest)
net income
the usual trade-off of choosing small payments is
paying more in interest
what are some steps one could take to achieve and maintain a good credit rating?*
use a credit card pay bills on time have money in savings don't move or change jobs a lot borrow $ and pay it back
