Unit 4: Debt

Question 1

Credit Card

Answer 1

A type of card issued by a bank that allows users to finance (borrow) a purchase.

Question 2

Annual Fee

Answer 2

The credit card company charges a yearly fee for the convenience of the credit card.

Question 3

Annual Percentage Rate (APR)

Answer 3

The cost of borrowing money on an annual basis; takes into account the interest rate and other related fees on a a loan.

Question 4

Introductory Rate

Answer 4

An initial APR offer to attract new customers.

Question 5

Loan Term

Answer 5

The time frame that a loan agreement is in force, and before or at the end of which the loan should either be repaid or renegotiated for another term. (24-84 months)

Question 6

Depreciation

Answer 6

A decrease or loss in value.

Question 7

Mortgage

Answer 7

A Loan for a house, building, or property. (15-30 years, fixed)

Question 8

Credit Report

Answer 8

A detailed report of an individual’s credit history.

Question 9

Credit Score

Answer 9

A measure of an individual’s credit risk; calculated from a credit report using a standardized formula.

Question 10

Debt Snowball

Answer 10

Repaying from smallest to largest balance; minimum payments are made to all debts except for the lowest balance, which is attacked with the largest possible payments.
(Encouragement from payed off debts)

Question 11

Debt avalanche

Answer 11

Repaying from largest to smallest interest rate; minimum payments are made to all debts except for the largest interest rate, which is attacked with the largest possible payments.
(Save money)

Question 12

When buying a house what 2 things should you save for?

Answer 12

A down payment (20%) and closing costs

Question 13

Why at least 20% of the purchase price on a down payment when buying a house?

Answer 13

To avoid mortgage insurance.

Question 14

Inspection Objections

Answer 14

Final chance to find things and get them fix or negotiated on the price.

Question 15

Appraisal

Answer 15

Valuating the estimated value of the house before closing.

Question 16

What does a credit score measure?

Answer 16

How good you are at paying money back.

Question 17

What are the five elements of a credit score

Answer 17

1. 35% payment history
2. 30% amounts owed
3. 15% length of credit history
4. 10% new credit
5. 10% credit mix

Question 18

What are the three main credit bureaus?

Answer 18

TransUnion, Experian, and Equifax.

Question 19

What is a net worth

Answer 19

Assets - Liabilities = Net Worth
(A snapshot of financial health)