Personal Financial Management - Chapter 4 Flashcards Preview

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Flashcards in Personal Financial Management - Chapter 4 Deck (54)
0

Cash advance

Charges of 400% and up for their services

1

Co-signing

Taking responsibility for someone else's loan

2

Loaning money to a friend or relative

Strains / destroys relationships

3

You take responsibility for a loan that probably won't get paid back if you...

Co-sign a loan

4

80% of...

Millionaires are first generation millionaires --> they started with nothing

5

What services are only out to benefit the owners of their company? (4)

Cash advance

Rent-to-own

Title pawning

Tote-the-note-lots

6

The lottery and gambling are...

Forms of taxes that target the poor and people who can't do math

7

The typical millionaire drives...

Reliable used cars in order to avoid car payments

8

What is the average car payment per month over how many months?

$464/per month for over 64-months

9

Leasing (3)

The most expensive way to operate and finance a vehicle

Can write-off your paid-for car on taxes, if you own a business, without paying payments

Can minimize money lost on things that go down in value by buying slightly used

10

A new car loses...

70% of its value in its first 4 years

11

Never take out more than a __ __ ___ rate mortgage

15 year fixed

12

It's never wise to take out an ___ or ____ _____ if you know you'll be moving, because.... (2)

- ARM or a balloon mortgage

- they will foreclose, the ARM transfers the risk of higher interest rates to you

13

A debit card card...

Can do whatever a credit card can do but is better (can rent a car and can make a purchase online, or by phone)

14

You spend ___ to ___ less when using ____ rather than ____ (3)

12-18%

Cash

Plastic

15

Teens are a huge target of... (2)

Credit card companies

About 80% of college graduates have credit card debt before they even get a job

16

The home equity loan is BAD for...

Consolidation and isn't a substitute for the emergency fund

17

Debt consolidation is bad because... (3)

It saves little or no interest

You can't borrow your way out of debt

Smaller payments = more time spent in debt

18

The borrower is a ___ to the lender

SLAVE

19

The fastest growing group of bankruptcy filers consist of...

People under 25 years old

20

Car payments are...

NOT a way of life

21

You don't need to build your credit score by...

Applying for a credit card

22

Best way to beat debt?

Quit borrowing money and live on less than what you make

23

Reasons people think a home equity loan is good (2)

Tax refund

Substitute for emergency fund

24

Pay off debts....

SMALLEST TO LARGEST

25

What appreciates and what depreciates? (2)

The value of your house appreciates

The value of your car depreciates

26

First charge card in the U.S.?

Diners club

27

JC penny =

James cash penny ---> didn't like debt

28

The first debt in the debt snowball is the one with the highest interest rate

False

29

78% of Americans...

Don't pay off their card every month

30

Why do people go into debt when they know that they will have to pay more for an item once they figure interest?

You spend 12-18% more than if you use cash

31

Why are teens such a major target of the credit card industry?

Adults have all the credit card offers they can get, so they advertise to teens.

32

Why is it better to buy a used car instead of a brand new vehicle?

The car loses value when you leave the lot so you pay more than its worth

33

Annual fee

Fee charged by a credit card company for the use of their credit card

34

Annual percentage rate (APR) (2)

Cost of borrowing money on an annual basis

Takes into account the interest rate and other related fees on a loan

35

Adjustable rate mortgage (ARM) (3)

Home loan secured by a deed of trust or mortgage in which the interest rate will change periodically (I.e. Annually)

Typically adjusted based on a published index such as the treasury bill or LIBOR

Brought on as a result of high interest rates in the early 1980s as a way for banks to transfer the risk of higher rates to the consumer

36

Balloon mortgage (2)

Home loan in which the sum of the monthly payments is insufficient to repay the entire loan

A final payment comes due, which is a lump sum of the remaining principal balance

37

Credit

Money owed/loaned

38

Credit card

Tool used to finance a purchase

39

Credit limit

The maximum amount of credit a lender will extend to a customer

40

Debit card (3)

Type of card, often bearing the seal of a major credit card company

issued by a bank and used to make purchases

unlike a credit card, the $ comes directly out of a checking account (aka a check card)

41

Debt consolidation

Act of combining all debts into one monthly payment, typically extending the terms and the length of time required to repay the debt

42

Debt snowball (3)

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

43

Depreciation (2)

A decline in the value of property

Opposite of appreciation

44

Finance charge

The total dollar amount you pay to use credit

45

Foreclosure

The 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

46

Grace period

Time period during which a borrower can pay the full balance of credit due with no finance charges

47

Home equity loan (HEL) (2)

Credit line offered by mortgage lenders that allows a homeowner to borrow money against the equity in their home

Uses your home as collateral to borrow money

48

Introductory rate (3)

A temporary interest rate

Advertised as a low APR to entice customers to apply for a credit card

After the introductory period, the interest rate will increase to the regular APR

49

Lease

A long-term rental agreement, and a form of secured long-term debt

50

Loan term

The length of time you have to pay off a loan

51

Myth

Information that's been passed on but isn't true

52

Paradigm (2)

Your belief system

The way you see or perceive things

53

Tax deduction

An expense that a tax payer is allowed to deduct from taxable income