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Personal Finance > Test 3 > Flashcards

Test 3 Flashcards

1
Q

Someone is willing to loan you money-called principle- in exchange for your promise to pay it back, usually with interest

A

Credit

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2
Q

The loan amount

A

Principle

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3
Q

The amount you pay to use someone else’s money

A

Interest

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4
Q

APR

A

Annual percentage rate

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5
Q

The amount it costs you a year to use credit

A

APR

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6
Q

A yearly charge for the privilege of using a credit card

A

Annual fee

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7
Q

The dollar cost of using credit, which is calculated by a lender

A

Finance change

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8
Q

A charge for setting up a loan, usually associated with home loans

A

Origination fee

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9
Q

How long the loan lasts

A

Loan term

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10
Q

The longer the loan term, _______

A

The greater the costs of credit

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11
Q

4 Advantages of credit

A
  1. Access to cash in an emergency
  2. The ability to use it now
  3. Safety and convenience
  4. Earn bonus points or miles
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12
Q

4 disadvantages of credit

A
  1. Can lead to overspending
  2. Future income is tied up
  3. Reduces the amount of comparison shopping
  4. Credit purchases may cost more than cash purchases
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13
Q

Where do you get credit?

A 
Banks and credit unions
Auto dealers
Department stores
Colleges
Financial institutions 
Federal government
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14
Q

Advantages of credit cards

A

Easy and convenient to use
Get cash when you want it
No loan term

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15
Q

Is a lower or higher APR good?

A

Lower, some can go as high as 20%

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16
Q

Tips for smart credit card use

A

Look for cards with no annual fee, a grace period, and a low APR

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17
Q

Allowed to make small payments, but the rest of the balance is compounding at the card’s APR

A

Minimum payment

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18
Q

How do you avoid interest charges on your credit card?

A

Pay your balance off in full

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19
Q

Most start about $500, but can go much higher

A

Credit limit

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20
Q

Money issued to students to pay for college, usually at a low interest rate

A

Student loans

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21
Q

What percentage rate are most student loans

A

2-8%

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22
Q

Money issued to future home owners

A

Mortgages

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23
Q

A maximum of ____ of your net income should go towards all of your loan payments (not including mortgage)

A

20%

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24
Q

How long are mortgage loans typically

A

15-30 years

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25
Q

A maximum of ____ of your net income should go toward paying your mortgage loan

A

33%

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26
Q

Things to look for when applying for credit

A 
The APR
The loan term
Maximum amount of the loan
Minimum payment amount 
Any annual or upfront fees 
Additional fees
Amount of income you need to qualify
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27
Q

Your credit history, a record of your personal financial transactions

A

Credit record

28
Q

What does your credit record do?

A

Potential lenders will thoroughly examine it and many employers check it when making hiring decisions

29
Q

How to build good credit

A 
Pay bills on time
Don’t bounce checks
Make regular deposits to savings account 
Pay your credit card bills on time 
Have a parent co-sign
30
Q

The entire amount of money you owe to lenders

A

Debt

31
Q

How do you get out of debt

A

Spend less money than you earn, the to make the minimum required payments and use the money left over to pay off the loans with the highest interest rate, and talk to a nonprofit credit counselor

32
Q

What percent of Americans live paycheck to paycheck

A

70%

33
Q

A legal process that allows someone deeply in debt to create a plan to get out of it

A

Bankruptcy

34
Q

Allows to erase most of your debt. To qualify, you typically must be unemployed or have a very low income. Must go to financial counseling

A

Chapter 7 bankruptcy

35
Q

Allows you to pay back some of your debts with more time. A court typically oversees the repayment plan to ensure accountability

A

Chapter 13 bankruptcy

36
Q

First ever credit card name

A

Diner club

37
Q

Examples of banks and credit unions

A

Credit cards, car loans, personal loans and home loans

38
Q

Examples of auto dealers

A

Financing for cars

39
Q

Examples of department stores

A

Credit cards with discounts to their stores

40
Q

Examples of colleges

A

Student loans

41
Q

Examples of financial institutions

A

Payday loans, money tree

42
Q

Examples of federal government

A

Business loans

43
Q

How does bankruptcy affect lenders

A

They must absorb loan losses they can’t recover by raising rates on other loans and services

44
Q

How does bankruptcy affect borrowers

A

Responsible borrowers must pay higher rates to help lenders recover losses on bad loans

45
Q

How does bankruptcy affect people who declare it

A

Their actions remain on their credit records for up to 10 years and it’ll be way harder and more expensive to borrow money

46
Q

Four advantages of bankruptcy

A

Debts are erased
Exempted items are allowed
Certain incomes are unaffected
Cost is small

47
Q

Disadvantages of bankruptcy

A 
Cloud of credit
Property is lost
Some obligations remain 
Some debts can be reaffirmed 
Co-signers may have to pay
48
Q

Items exempted from bankruptcy

A 
Equity in home
Motor vehicle 
Clothing 
Animals
Musical instruments 
Jewelry 
Crops
49
Q

Obligations not exempted from bankruptcy

A

Child support
Alimony
Income tax
Student loans

50
Q

Protection against large scale financial loss

A

Insurance

51
Q

The payment you make to an insurance company in exchange for it’s promise of protection and help

A

Insurance premium

52
Q

The amount of the loss you just pay out of your own pocket before the insurance company begins to reimburse you

A

Deductible

53
Q

The higher the deductible, the lower the _____

A

Premium

54
Q

Things that will affect your insurance

A 
Personal driving record 
Car type (more doors and slower it is, the cheaper) 
If you’re single and under 25 you pay more
Geographic location
Good grades
Take drivers ed
Males pay more 
Distance you drive
55
Q

Pays for bodily injury to other people and damage to property

A

Liability coverage

56
Q

Protects you, your family and anyone riding with you in your car

A

Medical payments

57
Q

Protects you if you get in an accident with someone without insurance

A

Uninsured motorist

58
Q

Types of auto insurance

A

Liability coverage
Medical payments
Uninsured motorist

59
Q

Pays to repair your car if it’s damaged in an accident by colliding with another car

A

Collision

60
Q

Protects you from everything except a collision

Theft, hail, flood, vandalism ect.

A

Other than collision

61
Q

Pays the medical bills in case you or your family members become sick or injured

A

Health insurance

62
Q

How long can you stay on your family’s insurance

A

Until 26

63
Q

Protects your material possessions such as clothes, stereo, TV, appliances, furniture, bike, computer

A

Property insurance

64
Q

Protects people who depend on you financially in the event of your untimely death

A

Life insurance

65
Q

What percent of people under the age of 19 will have their identity stolen?

A

8%

66
Q

Fastest growing white collar crime in America?

A

Identity theft

Personal Finance (4 decks)

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