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PMM > Test Number 2 > Flashcards

Test Number 2 Flashcards

1
Q

What is Credit?

A

means someone is willing to loan you money - called principal - in an exchange for you to repay it, usually with interest

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2
Q

Using a credit card to buy a car, house, etc

A

No money is needed up front

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3
Q

Common types of credit

A

Credit Card
Installment Loan
Student Loan
Mortgage

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4
Q

Credit Cards are given by :

A

Banks
Stores
Credit Unions
Gas Stations

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5
Q

Credit cards can…

A

can be used at almost any store,
no pay off deadline,
Monthly minimum payments vary,
Usually higher interest rates

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6
Q

Installment loans are given by :

A

Banks
Credit Unions
Auto Dealers
Financial Institutions

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7
Q

Installment Loans …

A

Used for larger purchases such as a car or appliances
Loan term can be a few months to years
Usually lower interest rates than credit cards

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8
Q

Student Loans are given by :

A

Banks
Credit Unions
Federal Gov

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9
Q

Student Loans…

A

Used to pay tuition and other college expenses
Loan term is usually up to 10 years
Monthly payments are usually set annually
Usually has a lower interest rate than an installment loan

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10
Q

Mortgage given by :

A

Banks and Credit Unions

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11
Q

Mortgage …

A

Used specifically for a loan to purchase a home
Usually repaid over 15-30 years
Monthly payments are set for the life of the loan

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12
Q

Annual Percentage Rate (APR)

A
  • Tells you the cost of the loan per year as a percentage of the borrowed amount
  • Law requires all lenders to calculate the APR the same say
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13
Q

The Goods of Credit

A 
Convenience
Protection
Emergencies
Opportunity to build credit
Bonus and Special Offers
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14
Q

The Bads of Credit

A 
Interest
Overspending
Debt
       - The amount you have borrowed
Identity theft
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15
Q

Annual Fee

A

a yearly charge you pay for using credit

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16
Q

Finance Charge

A

The actual dollar cost of using credit

17
Q

Origination Fee

A

The charge for setting up a loan

18
Q

Loan Term

A

the length of the time you have to pay off the loan

19
Q

Grace Period

A

the length of time before you accumulate interest

20
Q

What is needed to get a credit card? (8 things)

A 
Social Security Number
Driver's License
Date of Birth
Address
Phone Number
Monthly income amount
Total monthly payments for debt
Amount of monthly rent or mortgage
21
Q

The 4C’s

A

Collateral
Capital
Capacity
Character

22
Q

Collateral

A

an asset of value that lenders can take from you if you do not repay the loan as promised

23
Q

Capital

A

Lenders take comfort in knowing you have personal items of value
In the event that you do not pay your bills, lenders will want to know if you have items they can sell to repay the loan

24
Q

Capacity

A

Lenders chief concern is whether you are able to repay your loan
Key factors of creditworthiness are your income and employment history
A pattern of steady income and rising employment, gives lenders confidence

25
Q

Character

A

Lenders want to know if you are trustworthy
One way to look at your credit history
A history of paying your bills on time shows responsibility

26
Q

Credit Report

A

a record of your personal financial transactions, or credit history
Basically your report card for 7-10 years

27
Q

Credit Score

A

a number that reflects your creditworthiness, based on the 4C’s
Lenders want to know the risk they are taking

28
Q

Who looks at your credit score?

A 
Credit card companies
When you apply to rent an appartment
when you go to buy a house
When you buy a cell phone
Buy a car
29
Q

FICO

A

Most popular credit score

Fair Isaac Corporation

30
Q

How to build credit history

A

Always pay your bills on time
Make regular deposits into accounts
Apply only to credit card that fits your needs
Maintain a low balance and pay it off each month

31
Q

What can affect your credit history?

A

One missed payment
“Bouncing” checks
Having many credit cards and loans
Maintaining a high balance on credit ards

PMM (3 decks)

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