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Personal Financial Planning > Unit 5 > Flashcards

Unit 5 Flashcards

1
Q

Cash, goods, or services received now and arranged to pay later

A

Credit

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2
Q

When one uses credit to purchase consumer goods and services

A

Consumer credit

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3
Q

Credit that a lender approved for a specific purpose

A

Closed end credit

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4
Q

Not generally for a particular purchase, and, although billing periods and require moments for minimum payment specified in advance.

A

Open end credit

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5
Q

They obtain funds from investors and from short-term borrowing

A

Consumer finance companies

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6
Q

Lenders assessment of your ability to repay your debts

A

Capacity

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7
Q

Lenders are also interested in households net worth and assets

A

Capital

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8
Q

Something of value a lender can take or force to be liquidated if payments are not met

A

Collateral

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9
Q

Precious credit, employment, and education history

A

Character

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10
Q

Terms of the loan

A

Conditions

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11
Q

What are two advantages of consumer credit?

A

You can buy now and pay later.
Convenient
A source of emergency cash

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12
Q

What are two disadvantages of consumer credit?

A

Increased cost
Impact on household financials
Risk of overspending
Higher insurance premiums

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13
Q

Person who agrees to take responsibility if you don’t meet your loan payments

A

Co-signer

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14
Q

Companies that prepares your credit worthiness and reports it

A

Credit bureau

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15
Q

What are three ways to raise credit score?

A

Correct outdated and incorrect information on your credit report
Consistently make timely payments

Reduce your total debt

Develop a longer credit history

Include a mix of types Credit, not just credit cards

Close accounts that you haven’t used recently

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16
Q

What are three strategies or ways to reduce debt?

A

Set up debt repayment plan

Obtain a debt consolidation loan at a lower interest rate

Take a second job specifically earmarked to pay down debt

Develop a zero based budget

Love with family or friends to reduce expenses

Sell assets

17
Q

Lenders must provide you with full and truthful information

A

Truth in lending act

18
Q

What are three rights as a borrower?

A

Freedom from discrimination
Privacy of financial information
Know why you were denied credit
Fair and respectful debt collection
Accuracy of reported credit info
Correcting information on your credit report

19
Q

Legal act of requesting that debt be relieved. Stays on credit report for 10 years

A

Bankruptcy

20
Q

This type of bankruptcy requires the liquidation of most assets

A

Chapter 7 Bankruptcy

21
Q

This type of bankruptcy allows you to generally keep all assets

A

Chapter 13 Bankruptcy

22
Q

Plastic card printed with an account number and identifying the holder as a person who has entered into a revolving credit agreement with a lender

A

Credit Card

23
Q

Borrowing cash for a transaction

A

Cash advance

24
Q

Issued by a bank and is typically run through Visa, Mastercard, AmEx, or Discover.

A

Bank Credit Cards

25
Q

Offered by a retail company and the card can only be used at their chain. Typically has perks for signing up

A

Retail credit card

26
Q

Typically allows travel costs to be paid later and earn rewards for travel

A

Travel and Entertainment Card (T&E)

27
Q

Electronically subtract cash from savings or checking through a plastic card

A

Debit Card

28
Q

Card embedded with a computer chip that can store more information, stored electronic cash

A

Smart Card

29
Q

Difference between the market value of your home and the remaining balance in your mortgage

A

Home equity

30
Q

Legal document that represents promise to pay the full loan amount

A

Promissory Note

31
Q

What is the difference between secured and unsecured loans?

A

Secured loans have collateral while I secured loans do not.

32
Q

What is the difference between fixed and variable rate?

A

Fixed has the same interest throughout the life of the loan while variable has a fluctuating rate throughout the term

33
Q

Original borrowed amount

A

Principal

34
Q

Allows the borrower to repay over time with principal and interest

A

Installment loan

35
Q

This happens whenever a payment is overdue

A

Default

36
Q

Makes entire balance due and payable if you don’t make payments as promised

A

Acceleration clause

Personal Financial Planning (9 decks)

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