Personal Finance- Exam 2

Costs associated with credit cards (types of fees)

Annual fee. An annual fee is charged once a year for the convenience of having a credit card. Finance charge. Late fee. Balance transfer fee. Over-limit fee. Cash advance fee. Expedited payment fee. Foreign transaction fee.

Bankruptcy and how long it affects your credit

Bankruptcy is a legal proceeding involving a person or business that is unable to repay their outstanding debts. Bankruptcies stay on consumers' credit reports for 10 years from their filing date.

How to fix errors on your credit report

Begin by telling the credit bureau what information you believe is inaccurate. Credit bureaus must investigate the item(s) in question-usually within 30 days-unless they consider your dispute frivolous. Include copies (NOT originals) of documents that support your position.

Installment loan

a type of loan where a consumer borrows a set amount of money at one time.

Lemon law

are United States state laws that provide a remedy for purchasers of cars and other consumer goods in order to compensate for products that repeatedly fail to meet standards of quality and performance.

Non-installment loan

credit refer to a system of credit that is payable in one lump-sum amount by a specified date.

Car dealer low-balling

generally occurs just before the close of a sale. You should sign a buyer's order for a vehicle only after the salesperson and sales manager have already done so. Most auto dealers will provide a used-vehicle history report at no cost to a prospective buyer. Redress means to right the wrong.

Salvage title

is a form of vehicle title branding, which notes that the vehicle has been damaged and/or deemed a total loss by an insurance company that paid a claim on it.

unsecured loan

is a loan that is issued and supported only by the borrower's creditworthiness, rather than by any type of collateral.

installment loan

is a type of loan where a consumer borrows a set amount of money at one time.

Finance charge

is any fee representing the cost of credit, or the cost of borrowing.

Dealer holdback

refers to a payment from the automaker to dealers for selling a new vehicle.

Impulse buying

the buying of goods without planning to do so in advance, as a result of a sudden whim or impulse

Rebuilt title

when a car with a savage title has replaced parts and is put back on the market

APR

(annual percentage rate) refers to the annual rate of interest charged to borrowers and paid to investors.

Bank credit cards

-flexible account-accepted anywhere-available from a financial institution (with a service provider)

Credit Report

A credit report is a statement that has information about your credit activity and current credit situation such as loan paying history and the status of your credit accounts

FICO

A credit report is a statement that has information about your credit activity and current credit situation such as loan paying history and the status of your credit accounts ( Fair, Isaac and Company)

Credit Score

A credit score predicts how likely you are to pay back a loan on time and is a three-digit number designed to represent the likelihood you will pay your bills on time

Open-ended credit

A pre-approved loan between a financial institution and borrower that may be used repeatedly up to a certain limit and can subsequently be paid back prior to payments coming due. The pre-approved amount will be set out in the agreement between the lender and the borrower.

Negative aspects of using credit

Easy to overspend. Since you're not using physical money or a checkbook and don't have to pay right away, credit card purchases may not feel quite as expensive when you make them. High interest rates. Fraud. Confusing terms. Multiple ways to hurt your credit.

Continuous-debt method

If you are unable to get completely out of debt every four years, you probably lean on debt too heavily. Dual-earner households should consider a lower debt limit.

Debt to disposable income ratio

Once you've calculated what you spend each month on debt payments and what you receive each month in income, you have the numbers you need to calculate your debt-to-income ratio. To calculate the ratio, divide your monthly debt payments by your monthly income. Then, multiply the result by 100 to come up with a percent.

Loan principal

Principal is the money that you originally agreed to pay back. Interest is the cost of borrowing the principal. Generally, any payment made on an auto loan will be applied first to any fees that are due (for example, late fees).

What are the advantages?

Save on interest and fees. The biggest benefit of good to excellent credit is saving money. Manage your cash flow. Avoid utility deposits. Better credit card rewards. Emergency fund backup plan. Avoid and limit financial fraud. Purchase and travel protections. Don't underestimate the power of good credit.

Periodic Rate

The periodic rate equals the annual interest rate divided by the number of periods. For example, the interest on a home loan is usually calculated monthly, so if the annual interest rate is 4 percent, then you divide that by 12 and get 0.33 percent. That's your interest every month.

What is a credit score good for?

With good credit, you have better chances at qualifying for a mortgage, lease or car loan.

Factors that affect credit positively and negatively

Your credit scores are determined by several factors, such as whether you pay bills on time and the length of time you've used credit.

Debt to income ratio

Your debt-to-income ratio is all your monthly debt payments divided by your gross monthly income.

Secured loan

a loan backed by collateral—financial assets you own, like a home or a car—that can be used as payment to the lender if you don't pay back the loan.

Unsecured loan

a loan that is issued and supported only by the borrower's creditworthiness, rather than by any type of collateral.