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Personal Finance > Ch 16 > Flashcards

Ch 16 Flashcards

1
Q

money borrowed to buy something now, with an agreement to pay later; have to be 18

A

credit

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2
Q

the history of credit in the early years:

A

general store (dollar store, CVS)

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3
Q

history of credit 1990

A

increased understanding of credit

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4
Q

credit today=

A

1990’s record # of brankruptcy’s

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5
Q

person borrowing money

A

borrower or debtor

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6
Q

loaning the money

A

creditor

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7
Q

all your assets added (what you own)—-what you owe (liabilities)

A

capital

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8
Q

money/net worth you have after debts

A

capital

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9
Q

pledging to repay the loan

A

collateral

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10
Q

on credit, it’s the $$ you borrow

A

principal

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11
Q

anything you have to pay back over and above the principal

A

finance charge

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12
Q

you pay these in incriments (pay $400/month for 36 monts)
ex. mortgage, car payment
AKA close-ended

A

installment agreement

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13
Q

whatever you take the loan out for, is used as collateral

A

secured loan

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14
Q

ex. of non-secured loan =

A

student loan

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15
Q

List the advantages of consumer credit

A
  • purchasing power
  • emergency funds
  • convenience
  • deferred billing
  • safety
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16
Q

List the disasdvantages of consumer credit

A
  • higher prices
  • finance charges
  • tie up income
  • overspending
17
Q

QUALIFICATION for credit is based on 3 things:

A

income
financial position
collateral

18
Q

the value of property you possess (such as bank accounts, investments) after deductig your debts

A

capital

19
Q

represents cash outflow and will be compared to your cas inflow (income)

A

your debt

20
Q

open 30 day accounts, can always use a credit card

A

open-ended credit

21
Q

ex. installment agreement

A

closed-end credit

22
Q

service now, pay later

ex. cell phone, cable

A

service credit

23
Q

What are some sources of credit?

A
  • retail stores
  • credit card companies
  • banks and credit unions
  • finance companies
  • pawnbrokers
  • private lenders (mom, dad, friends)
24
Q

the free period which allows you to avoid a finance charge if you pay in full before the due date

A

grace period

25
Q

pre-established amount that can be borrowed on demand

A

line of credit

26
Q

money borrowed against the credit card limit

A

cash advance

27
Q

unlicensed leaders who charge illegal interest rates

A

loan sharks

28
Q

a service to customers that allows you to charge now and not be billed for several months

A

deferred billing

29
Q

in some states, maxium interest rates are set by _____ laws

A

usury

30
Q

a legal business where loans are made based on the value of mercandise used as collateral

A

pawnbroker

31
Q

something of value that can be sold to pay a debt is often referred to as _______

A

collateral

32
Q

finance companies charge higer rates of interest on loans because ______

A

they take more risk

Personal Finance (7 decks)

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