Ch. 4- Dangers of Debt

Question 1

Annual Fee

Answer 1

fee for the use of a credit card

Question 2

Annual Percentage Rate

Answer 2

cost of borrowing money on an annual basis

Question 3

ARM/ Balloon Mortgage

Answer 3

home loan where the sum of the monthly payments is insufficient to repay the entire loan

Question 4

Credit

Answer 4

money owed

Question 5

Credit Card

Answer 5

tool used to finance a purchase

Question 6

Debit Card

Answer 6

a card that takes money directly out of a checking account

Question 7

Debt Consolidation

Answer 7

combining all debts into one monthly payment

Question 8

Debt Snowball

Answer 8

method of debt repayment, list debts smallest to largest, pay smallest first

Question 9

Depreciation

Answer 9

decline in the value of property

Question 10

finance charge

Answer 10

any fee representing the cost of credit

Question 11

Foreclosure

Answer 11

holder of the mortgage sells the property of a homeowner who can’t pay payments on time

Question 12

Grace Period

Answer 12

time period where borrower can pay full balance of the credit with no finance charges

Question 13

Home Equity Loan

Answer 13

borrowing money against the equity in their home

Question 14

Introductory Rate

Answer 14

a lower interest rate for the first initial months of a loan, later it goes up to normal

Question 15

Lease

Answer 15

long-term rental agreement-form of long-term debt

Question 16

Loan Term

Answer 16

a loan repaid in payments over a length of time

Question 17

Myth

Answer 17

info that has been passed on but isn’t true

Question 18

Paradigm

Answer 18

your belief system

Question 19

Tax Deduction

Answer 19

expense that a taxpayer can deduct from taxable income

Question 20

T/F Debt Consolidation is wise

Answer 20

false

Question 21

T/F The typical millionaire drives new cars.

Answer 21

false

Question 22

Who is the number one target for credit card companies?

Answer 22

teenagers

Question 23

T/F co-signing a loan is a good way to help a friend out.

Answer 23

false

Question 24

T/F The lottery is a tax on the poor and people who can’t do math.

Answer 24

true

Question 25

T/F Home equity loans are a good way to consolidate a debt

Answer 25

false

Question 26

T/F It is never wise to take out an ARM or balloon mortgage

Answer 26

true

Question 27

T/F Paying off the balance of your credit card each month is an acceptable use of credit.

Answer 27

false

Question 28

T/F It is best to attack your debt by consolidating many payments into one

Answer 28

false

Question 29

Why are teens the number one target for credit card companies?

Answer 29

you stay loyal to your first card, college students don't have much money

Question 30

How do cash advance and car title companies keep people in the cycle of debt?

Answer 30

leasing; making people think these things are necessary

Question 31

Why does debt consolidation typically not save money?

Answer 31

doesn't save interest, smaller payments equals a longer time in debt

Question 32

Explain how the debt snowball works.

Answer 32

make a list of debts smallest to largest, pay the minimum to all except the smallest, pay as much as possible to knock off the smallest one

Question 33

What are the 5 steps to get out of debt?

Answer 33

1) Quit borrowing money 2) Save money 3) Sell something 4) Part-time job/overtime 5) Debt snowball

Question 34

What percentage of Americans are living paycheck to paycheck?

Answer 34

70%

Question 35

Our great grandparents thought debt was ________. Our grandparents thought it was _________. Our parents ________. We _________.

Answer 35

sin, stupid, borrow on a few things, borrow on everything

Question 36

What percentage of America's millionaires are first-generation rich and what does that mean?

Answer 36

80% they started out with nothing then did smart stuff to get there

Question 37

What is the difference between poor and broke?

Answer 37

poor is a state of the mind and broke is a place

Question 38

According to the study, people without a high school diploma spent how much a month playing the lottery? How much do college graduates spend?

Answer 38

173; 49

Question 39

What is the average car payment today?

Answer 39

$464/month over 64 months

Question 40

What is the most expensive way to finance and operate a vehicle?

Answer 40

leasing

Question 41

How much of a new car's value does it lose within 4 years?

Answer 41

70%

Question 42

You usually spend how much more when paying with cards not cash?

Answer 42

12-18%

Question 43

The fastest-growing group of bankruptcy filers consist of people in what age group?

Answer 43

under 25

Question 44

Charges of 400% and up for their services

Answer 44

Cash advance