Credit, Loans, and Vehicles Quiz Flashcards
How do credit card companies make money?
Merchants and consumers
What are the types of credit?
Non installment, installment, and revolving
Explain non installment credit.
Is unsecured, is a credit in which you are paying for a service that you already used. It requires you to make payments in full by a specified date and this type of credit does not have interest. If you don’t pay within specified time then service fees or discontinuation of service will occur.
What are the interest compound monthly and daily formulas?
1) B = P(1+i/12) ^m
2) B = P(1+i/365)^d
Credit Score
A number that represents your calculated measure of risk. It is determined by a statistical analysis of your credit report.
How do you fix your credit score?
Reduce your debt & see a credit counselor
List the 3 companies that produce credit scores.
Equifax, Experian, Transunion
Down payment
A portion of the purchase price that the buyer is required to pay.
Cosigner
Someone that agrees to sign the loan document. They are responsible to repay the loan if you stop paying on it.
Collateral
The asset pledged against a secured loan.
Credit Limit
Amount of money the credit card company has decided you can spend, which is based on credit score.
Minimum Payment
The lowest amount you are required to pay each billing cycle. Should always pay more than this amount.
APR
Annual Percentage Rate
Compare Loans and Credit Cards
Loans - 1 time use, typically lower interest rates, have maturity dates.
Credit Cards - Can use at any time, typically higher interest rates, minimum payment, but no maturity date.
Differences between a Loan and a Lease.
Loans - like buying & payments are almost always higher than lease payments. (pay less b/c of interest + fees…)
Lease - like renting & payments are almost lower than loan payments. (pay more b/c of interest + fees…)
