Debt And Credit Optimization Flashcards
What is amortizing debt?
A loan where payments cover interest and reduce principal over time (e.g., mortgage).
What is revolving debt?
Debt that can be reused after payment, like credit cards—can carry high interest.
What is compound interest (on debt)?
Interest charged on both principal and accumulated interest.
What is a balloon loan?
A loan with small initial payments and one large lump-sum payment at the end.
What is predatory lending?
Lending practices that impose unfair, deceptive, or abusive loan terms on borrowers.
What are the 5 major credit score factors?
Payment history, amounts owed, length of credit history, credit mix, new credit inquiries.
What is a good credit score range?
670–739 is considered good; 740+ is very good or excellent.
What is a credit utilization ratio?
The percentage of your credit limit you’re using—keep it under 30%, ideally under 10%.
How often should you check your credit report?
At least annually—use AnnualCreditReport.com.
What’s the difference between soft and hard inquiries?
Soft doesn’t affect your score (e.g., pre-approvals); hard pulls do (e.g., loan applications).
What is the SAVE plan?
Income-driven repayment plan that lowers payments and limits interest accumulation.
What is PSLF?
Public Service Loan Forgiveness—loan forgiveness after 10 years of qualifying payments and employment.
What is a Direct Loan?
A federal student loan issued directly by the Department of Education—required for most forgiveness programs.
Should I refinance federal loans with a private lender?
Only if you won’t need forgiveness, income-based repayment, or federal protections.
What is student loan interest capitalization?
When unpaid interest is added to the loan balance—can grow debt quickly.
What is the snowball method?
Pay off the smallest debts first for momentum, regardless of interest rate.
What is the avalanche method?
Pay off the highest-interest debts first to minimize total cost.
What is a debt management plan (DMP)?
A structured repayment plan through a nonprofit credit counselor.
What’s the risk of debt consolidation?
It can lower rates and simplify payments, but without behavior change, debt can return.
What is bankruptcy?
A legal process to eliminate or restructure debt—Chapter 7 (liquidation) and Chapter 13 (repayment).
How do you reframe debt shame?
Debt is data, not a moral failure—it tells us where support is needed.
What’s a helpful phrase for debt avoidance?
Ignoring it won’t make it smaller—but facing it doesn’t have to be all at once.
How do you coach a client with debt anxiety?
Let’s separate the emotional weight from the math and tackle one piece at a time.
What is financial hypervigilance?
Over-monitoring money due to past trauma—often tied to survival-based money scripts.
