Personal Finance Chapter 7
A simple interest declining balance loan has the following terms: 8% annual interest rate, $3,000 loan, 2 payments: one at the end of the first half year and the last payment at the end of the second half year. What would be the amount of these two payments?
$1,620 and $1,560
Most credit card companies do not charge a fee when a cash advance is made.
False
Only about one million Americans belong to credit unions.
Flase
A married couple that does not talk about money could be
Having Debt Problems
Interest Rate
I=P × r × T
A credit counseling organization usually provides credit management classes and helps you devise a credit management
Plan
The Fair Debt Collection Practices Act prohibits certain practices by agencies that collect debts for creditors.
True
The pros and cons of T&E credit cards, such as American Express, include:
annual fees are typically high no finance charge is incurred as full payment of the balance owed is due each month full payment is due each month
The two major categories or types of credit are---- -end and open-end credit.
closed
Passbook loans are offered by
commercial banks
The costs to Chapter 13 bankruptcy include
trustees' fees and costs attorneys' fees court costs
The costs to Chapter 13 bankruptcy include:
trustees' fees and costs attorneys' fees court costs
Family loans are simple arrangements and can benefit both parties and no documentation is recommended.
False
On a discount loan of $2,000 with $75 interest, how much will you receive for loan proceeds?
$1,925
APR
=(2 × n × I) / [P × (N + 1)]
Before you borrow money you should ask yourself if you need a loan, if you can -------the loan, and if you can qualify for a loan.
Afford
If you cannot make a payment on a debt when due, contact the---- at once to work out a modified payment plan.
BAnk
Which of the following types of loans are offered by life insurance companies?
Cash value of whole life
The most commonly purchased type of credit insurance is
Credit Life Insurance
An example of a travel and entertainment card is:
Diners Club
Each 1% increase in the---- rate means a decrease of approximately 1% in the quantity of goods and services you can purchase with a given amount of money.
Inflation
One of the intangible costs of bankruptcy is the difficulty obtaining----in the future.
Loans
Sharon has been taking out student loans to finance her college education. She has amassed a great deal of debt, but plans to declare Chapter 7 bankruptcy to have the debt forgiven. Will her strategy work?
No; student loans are not forgiven in Chapter 7 bankruptcy
In Chapter 7 bankruptcy, a debtor is required to draw up a _____ listing his or her assets and liabilities.
Petition
Which of the following items of income and value are protected under a Chapter 7 bankruptcy?
SS payments and unemployment compensation Equity in cars Equity in home Household appliances Trade tools
Which of the following loans are available to consumers through commercial banks?
Second mortgages Passbook loans Credit cards
Which of the following is true about a repossession and the borrower's responsibilities after an auction sale of the vehicle by the bank?
The borrower owes the difference between the sale price and the unpaid debt plus legal, towing, and storage costs.
In a Chapter 13 bankruptcy, the debtor normally keeps _____ of the property.
all or most
CCCS counseling is usually
free
The two main activities of the CCCS are:
helping families with debt problems by helping them manage debts teaching families how to avoid heavy debt burdens in the future
The rule of 78s formula favors
lenders
Credit offered by car dealers is generally ___ expensive than most other car loans.
less
Family members may only charge interest they would have earned on the money if they had deposited it in a ______ account.
passbook
The trustee's role in a Chapter 13 bankruptcy involves distributing----- to creditors.
payments
The major provisions of the Credit Card Accountability, Responsibility, and Disclosure Act of 2009:
set a consistent due date for each month state that a teaser rate must be good for at least six months limits the issuer's ability to increase the interest rate in the first year
Credit offered by car dealers, such as financing through ______, may be less expensive than banks, but the downside is that the car dealer may be less willing to discount the price.
the General Motors Acceptance Corporation or Ford Motor Credit Corporation
Some credit card holders make the minimum payment to remain in good standing without making progress on reducing the outstanding balance. This is referred to as the minimum monthly payment
trap
The key pieces of information that credit card issuers must provide are:
variable rate information annual fees grace period APRs
Paying the _______ makes your credit card purchases much more expensive, especially at high interest rates.
minimum monthly payment.
Credit life insurance is generally ____ expensive compared to equivalent term life insurance.
more
Credit card issuers must provide certain information to consumers, including:
How to avoid paying interest Minimum interest charge, setup and maintenance fees APR for purchases, balance transfers, and cash advances Penalty APR and when it applies
Annual finance charge
Interest + Other costs
Lenders can reduce their risk by which of the following?
LArger down payment
Simple interest (I) is calculated as follows: Principal X Rate of Interest X
Time
Loans from finance companies and appliance stores tend to be the highest cost loans.
True
Most automobile financing agreements allow the lender to repossess your vehicle when you are in default on your payments.
True
The overindulgence of children can cause debt problems.
True
The rule of 78ths is a mathematical formula to determine how much interest has been paid at any point in a loan.
True
The costs of Chapter 13 bankruptcy include court costs, lawyer fees, and
Trustees fees
Consumer finance companies do not offer
credit card loans
A car is repossessed by a bank. The borrower owed $4,000 on the car. At an auction, the car is sold for $3,000 and the bank incurred a $150 towing charge. How much, if anything, will the borrower owe after the sale at auction?
$1,150, which is the unpaid loan balance and the towing charge
APR
=Annual finance charge / Principal borrowed
Total amount due
=Principal borrowed + Interest
Amount saved
=Regular price − Total cost
Finance charge for June
=[Beginning balance + Ending balance) / 2] × (Annual interest rate / 12)
Credit card issuers must provide certain information to consumers, including:
APR for purchases, balance transfers, and cash advances Penalty APR and when it applies Minimum interest charge, setup and maintenance fees How to avoid paying interest
The creditor in a Chapter 13 bankruptcy proposes a plan to pay off debts from future earnings over a period of time.
False
The three types of credit insurance are:
credit property credit life credit accident and health
In a straight bankruptcy, many but not all--- are forgiven
debts
The Fair Debt Collection Practices Act ______ to creditors that collect debts themselves.
does not apply
Which of the following are ways to lower lender risk and therefore lower the cost of borrowing?
Choose variable interest rate Make a larger down payment Only create short-term payments (lower rate and higher payments) Secure a loan by property or another asset
