Ch. 4- Dangers of Debt Flashcards
Annual Fee
fee for the use of a credit card
Annual Percentage Rate
cost of borrowing money on an annual basis
ARM/ Balloon Mortgage
home loan where the sum of the monthly payments is insufficient to repay the entire loan
Credit
money owed
Credit Card
tool used to finance a purchase
Debit Card
a card that takes money directly out of a checking account
Debt Consolidation
combining all debts into one monthly payment
Debt Snowball
method of debt repayment, list debts smallest to largest, pay smallest first
Depreciation
decline in the value of property
finance charge
any fee representing the cost of credit
Foreclosure
holder of the mortgage sells the property of a homeowner who can’t pay payments on time
Grace Period
time period where borrower can pay full balance of the credit with no finance charges
Home Equity Loan
borrowing money against the equity in their home
Introductory Rate
a lower interest rate for the first initial months of a loan, later it goes up to normal
Lease
long-term rental agreement-form of long-term debt
Loan Term
a loan repaid in payments over a length of time
Myth
info that has been passed on but isn’t true
Paradigm
your belief system
Tax Deduction
expense that a taxpayer can deduct from taxable income
T/F Debt Consolidation is wise
false
T/F The typical millionaire drives new cars.
false
Who is the number one target for credit card companies?
teenagers
T/F co-signing a loan is a good way to help a friend out.
false
T/F The lottery is a tax on the poor and people who can’t do math.
true
T/F Home equity loans are a good way to consolidate a debt
false
T/F It is never wise to take out an ARM or balloon mortgage
true
T/F Paying off the balance of your credit card each month is an acceptable use of credit.
false
T/F It is best to attack your debt by consolidating many payments into one
false
Why are teens the number one target for credit card companies?
you stay loyal to your first card, college students don’t have much money
How do cash advance and car title companies keep people in the cycle of debt?
leasing; making people think these things are necessary
Why does debt consolidation typically not save money?
doesn’t save interest, smaller payments equals a longer time in debt
Explain how the debt snowball works.
make a list of debts smallest to largest, pay the minimum to all except the smallest, pay as much as possible to knock off the smallest one
What are the 5 steps to get out of debt?
1) Quit borrowing money
2) Save money
3) Sell something
4) Part-time job/overtime
5) Debt snowball
What percentage of Americans are living paycheck to paycheck?
70%
Our great grandparents thought debt was ________.
Our grandparents thought it was _________.
Our parents ________.
We _________.
sin, stupid, borrow on a few things, borrow on everything
What percentage of America’s millionaires are first-generation rich and what does that mean?
80% they started out with nothing then did smart stuff to get there
What is the difference between poor and broke?
poor is a state of the mind and broke is a place
According to the study, people without a high school diploma spent how much a month playing the lottery? How much do college graduates spend?
173; 49
What is the average car payment today?
$464/month over 64 months
What is the most expensive way to finance and operate a vehicle?
leasing
How much of a new car’s value does it lose within 4 years?
70%
You usually spend how much more when paying with cards not cash?
12-18%
The fastest-growing group of bankruptcy filers consist of people in what age group?
under 25
Charges of 400% and up for their services
Cash advance
