Financial literacy part II Flashcards
Credit
when you borrow funds to bou goods in the present with the promise to pay them in the future
installment credit
when you buy a large durable good on credit and pay the same amount each month for a certain amount of months
revolving credit
is a line of credit where the customer pays a commitment fee to a financial institution to borrow money and is then allowed to use the funds when needed.
credit rating / score
risk involved in lending money to you
- lenders check your credit history
above 700 low risk
below 600 high risk
credit cards
- insured by bank
- allows u to purchase goods using a line of credit
credit score range
300 - 850 general range
5 factors that make up credit score
35% payment history 30% how much you owe 15% length of credit history 10% new credit 10% mixed credit
hard vs soft inquiries
hard - can lower score, stays on report for 2 years
soft- company can’t check score without your permission
APR
annual percentage rate
Insurance
contact that transfers risk of financial loss from an individual or business to an insurance company
risk pooling
company collects small amounts of money from it’s clients and pools that money together to pay for losses
risk
uncertain about the income
claim
paperwork submitted to insurance organization describing the accidentness or inquiry
coverage
the risk covered and amount of money paid for losses under and insurance
peril
the cause of a loss
hazard
condition that makes a peril more likely to happen or that increases the seriousness of a loss
loss
simple decline in value costs that are not obvious - indirect
deductible
amount of money paid out of pocket due to policy holder before the insurance coverage begins
premium
money paid to purchase the policy
insurable interest
exist whenever occurance of a certain event
- will result in a financial loss
bankruptcy
when someone is so deep in debt there is no other way to solve the problem
what is not forgiven from bankruptcy
- child support
- student loans
- fines and penalties
- taxes
- cosigner obligations
- credit purchases of luxury
snowball effect
lists debts in order from smallest to largest
financial responsibility law
require drivers to be prepared for damages caused to others
liability insurance
covers you at fault for causing an accident to pay damages you caused to other persons property
25/50/25
medical
health care providers that work together
uninsured
provides protection from damages caused by a motorist who is at fault and does not not have insurance or means to pay for your damages.
underinsured
provides for damages to your car if the motorist has insurance but with insufficient coverage to pay for extent of your damages.
comprehensive
pays for damage to your vehicle caused by something other than a collision with another car or object
collision
pays when you are at fault to fix ur car
principle of indemnity
insurance company is the one that determines how much you can collect
health insurance
helps people pay for medical expenses
eye/dentist/ major medical
ppo
go to any health care professional you want
high premium
hmo
low premium
why do you need credit
so you can afford things like a house and get loans.
why is it bad to practice to only pay the minimum balance on your credit card statement monthly
you will be paying the balance for a longer time, causing it to gain more interest, will save you money the quicker you pay it off
why is bankruptcy the last resort option
- drops credit by 200 points
- stays on credit card history for 10 yrs
- anyone who can lend you money can see it
explain why ur grandma needs to have life insurance
so the dependents can maintain their standard of living when she dies
what is the relationship between deductibles and premiums
premium - amount paid to purchase policy
deductible - amount paid out of pocket before insurance coverage begins.
