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Personal Finance > Test 3 > Flashcards

Test 3 Flashcards

(66 cards)

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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
A maximum of ____ of your net income should go toward paying your mortgage loan
33%
26
Things to look for when applying for credit
``` 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 ```
27
Your credit history, a record of your personal financial transactions
Credit record
28
What does your credit record do?
Potential lenders will thoroughly examine it and many employers check it when making hiring decisions
29
How to build good credit
``` 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
The entire amount of money you owe to lenders
Debt
31
How do you get out of debt
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
What percent of Americans live paycheck to paycheck
70%
33
A legal process that allows someone deeply in debt to create a plan to get out of it
Bankruptcy
34
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
Chapter 7 bankruptcy
35
Allows you to pay back some of your debts with more time. A court typically oversees the repayment plan to ensure accountability
Chapter 13 bankruptcy
36
First ever credit card name
Diner club
37
Examples of banks and credit unions
Credit cards, car loans, personal loans and home loans
38
Examples of auto dealers
Financing for cars
39
Examples of department stores
Credit cards with discounts to their stores
40
Examples of colleges
Student loans
41
Examples of financial institutions
Payday loans, money tree
42
Examples of federal government
Business loans
43
How does bankruptcy affect lenders
They must absorb loan losses they can’t recover by raising rates on other loans and services
44
How does bankruptcy affect borrowers
Responsible borrowers must pay higher rates to help lenders recover losses on bad loans
45
How does bankruptcy affect people who declare it
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
Four advantages of bankruptcy
Debts are erased Exempted items are allowed Certain incomes are unaffected Cost is small
47
Disadvantages of bankruptcy
``` Cloud of credit Property is lost Some obligations remain Some debts can be reaffirmed Co-signers may have to pay ```
48
Items exempted from bankruptcy
``` Equity in home Motor vehicle Clothing Animals Musical instruments Jewelry Crops ```
49
Obligations not exempted from bankruptcy
Child support Alimony Income tax Student loans
50
Protection against large scale financial loss
Insurance
51
The payment you make to an insurance company in exchange for it’s promise of protection and help
Insurance premium
52
The amount of the loss you just pay out of your own pocket before the insurance company begins to reimburse you
Deductible
53
The higher the deductible, the lower the _____
Premium
54
Things that will affect your insurance
``` 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
Pays for bodily injury to other people and damage to property
Liability coverage
56
Protects you, your family and anyone riding with you in your car
Medical payments
57
Protects you if you get in an accident with someone without insurance
Uninsured motorist
58
Types of auto insurance
Liability coverage Medical payments Uninsured motorist
59
Pays to repair your car if it’s damaged in an accident by colliding with another car
Collision
60
Protects you from everything except a collision Theft, hail, flood, vandalism ect.
Other than collision
61
Pays the medical bills in case you or your family members become sick or injured
Health insurance
62
How long can you stay on your family’s insurance
Until 26
63
Protects your material possessions such as clothes, stereo, TV, appliances, furniture, bike, computer
Property insurance
64
Protects people who depend on you financially in the event of your untimely death
Life insurance
65
What percent of people under the age of 19 will have their identity stolen?
8%
66
Fastest growing white collar crime in America?
Identity theft

Personal Finance (4 decks)

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