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personal finance > unit 5: debt > Flashcards

unit 5: debt Flashcards

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1
Q

annual fee:

A

a yearly fee that is charged by the credit card company for the convenience of the credit card

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2
Q

annual percentage rate (APR):

A

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

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3
Q

credit card:

A

type of card issued by a bank that allows users to finance a purchase

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4
Q

credit report:

A

a detailed report of an individual’s credit history

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5
Q

credit score:

A

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

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6
Q

credit bureau:

A

an agency that researches and collects individual credit information and sells it for a fee to creditors so they can make a decision of granting loans to customers

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7
Q

debt snowball:

A

preferred method of debt repayment; includes a list of all debts organized from smallest to largest balance; minimum payments are made to all debts except for the smallest, which is attacked with the largest possible payments

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8
Q

introductory rate:

A

an interest rate charged to a customer during the early states of a loan; the rate often goes up after a specific period of time

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9
Q

loan term:

A

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

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10
Q

tax deduction:

A

an expense, such as a charitable contribution, that can be deducted from one’s taxable income

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11
Q

consumer:

A

a person or organization that uses a product or service

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12
Q

credit:

A

the granting of a loan and the creation of debt; any form of deferred payment

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13
Q

debt:

A

an obligation of repayment owed by one part to a second party

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14
Q

interest:

A

a fee paid by a borrower to the lender for the use of borrowed money; typically calculated as a percentage of the principal amount

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15
Q

loan:

A

a debt evidenced by a “note”, which specifies the principal amount, interest rate, and date of repayment

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16
Q

what is the second foundation of personal finance?

A

get out of debt

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17
Q

what percentage of Americans are living paycheck to paycheck?

A

70%

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18
Q

personal debt:

A

the amount of money an individual owes

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19
Q

is it smart to loan money to friends/family?

A

no, it could destroy relationships

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20
Q

is the lottery a good strategy to get wealthy?

A

no, it’s a tax on the poor and people who can’t do math

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21
Q

what are the three huge ways you lose when taking out a loan?

A
  1. payments: spreading the purchase of an automobile over 4-5 years hinders your ability to pay off debt or save money
  2. interest: you pay more than the sticker price
  3. depreciation: loss of value in your vehicle (biggest one)
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22
Q

what type of mortgage should you get when buying a new house?

A

no more than a 15-year fixed rate mortgage

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23
Q

what are home equity loans?

A

borrowing money against your house. they often come with higher, variable interest

24
Q

what should you do every month regarding your credit card?

A

pay off your credit card every month so you don’t go into debt

25
Q

foreclosure:

A

process by which the holder of a mortgage sells the property of a homeowner who has not made interest and/or principal payments on time as stipulated in the mortgage contract

26
Q

repossession:

A

process of a lender taking something back ( a car) for failure to make payments

27
Q

bankruptcy:

A

a legal procedure for dealing with debt when an individual or business cannot repay what they owe

28
Q

garnishment:

A

a court-ordered attachment that allows a lender to take monies owed directly from a borrower’s paycheck; only allowed as part of a court judgment

29
Q

surrender of collateral:

A

in a bankruptcy proceeding, a debtor can give up property (collateral) to the creditor. in exchange for a clean slate

30
Q

delinquency:

A

broadly referred to a borrower not being current on their payments

31
Q

what does FICO stand for?

A

Fair Isaac Corporation

32
Q

what are the 5 components of the credit score?

A

debt history, type of debt, duration of the debt, debt levels, and new debt

33
Q

what are the 3 main credit bureaus?

A

Equifax, Experian, and TransUnion

34
Q

___ ___ is the fastest-growing white-collar crime in North America today

A

Identity Theft

35
Q

how can you protect your identity?

A
  • check your credit card report annually
  • never print your social security number on your checks
  • create strong passwords
  • purchase identity theft protection
36
Q

what are 3 important things to do if you’re a victim of ID theft?

A
  1. file a police report and keep a copy of the report
  2. place a fraud-victim alert on your credit bureau report
  3. contact the fraud-victim division of the three main companies and furnish documentation
37
Q

credit:

A

an arrangement to receive cash, goods, or service now and pay for them in the future

38
Q

consumer credit:

A

the use of credit for personal needs

39
Q

creditors:

A

an entity that lends money

40
Q

what are some advantages of credit cards?

A

-convenient
- protection
- emergencies
- build credit
- instant gratification
- special offers and bonuses

41
Q

what are some disadvantages of credit cards?

A
  • interest
  • overspending
  • poor credit rating
  • identity theft
42
Q

closed-end credit:

A

credit as a one time loan that you will pay back over a specified period of time in payments of equal amounts
ex: mortgage, car loans

43
Q

open-end credit:

A

credit as a loan with a certain limit on the amount of money you can borrow for a variety of goods and services
ex: visa, mastercard, department store cards

44
Q

what should your debt to income ration be?

A

no more than 25%

45
Q

finance charge:

A

the total amount you pay to use credit

46
Q

minimum monthly payments:

A

smallest amount you can pay and remain a borrower in good standing

47
Q

What are the 4 C’s of credit?

A
  1. character
  2. capacity
  3. capital
  4. collateral
48
Q

Character:

A
  • want to know what kind of person they’re lending money to
    will you repay the loan?
49
Q

Capacity:

A
  • what is your job and how much is your salary
    can you repay the loan (do you need a cosigner?)
50
Q

capital:

A
  • want to know if you have enough capital to pay back the loan
    what is your net worth? (assets-liabilities)
51
Q

Collateral:

A
  • what assets do you have to secure the loan (house, car, etc.)
    what if you do not repay the loan?
52
Q

what is a good credit score?

A

anything above 700

53
Q

what are ways to build your credit?

A
  • open a checking or savings account
  • build up your assets
  • make payments on time
54
Q

what should you do to keep a good credit score?

A
  • make sure your report is accurate
  • pay all your bills on time
  • apply for credit only when you need it
  • lower the balances on all your credit accounts
  • pay off debt rather than move it around
55
Q

Cosigning a loan:

A

you’re agreeing to be responsible for loan payments if the other person fails to make them

56
Q

What are some ways to get out of debt?

A
  • sell somethings
  • part time jobs or overtime
  • quit borrowing money
  • create a repayment plan
57
Q

what are the effects of bankruptcy?

A
  • difficult to get credit
  • on your credit report for 7-10 years
  • remember don’t give up, there is a way to fix it

personal finance (6 decks)

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