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
