Unit 5 Flashcards
Cash, goods, or services received now and arranged to pay later
Credit
When one uses credit to purchase consumer goods and services
Consumer credit
Credit that a lender approved for a specific purpose
Closed end credit
Not generally for a particular purchase, and, although billing periods and require moments for minimum payment specified in advance.
Open end credit
They obtain funds from investors and from short-term borrowing
Consumer finance companies
Lenders assessment of your ability to repay your debts
Capacity
Lenders are also interested in households net worth and assets
Capital
Something of value a lender can take or force to be liquidated if payments are not met
Collateral
Precious credit, employment, and education history
Character
Terms of the loan
Conditions
What are two advantages of consumer credit?
You can buy now and pay later.
Convenient
A source of emergency cash
What are two disadvantages of consumer credit?
Increased cost
Impact on household financials
Risk of overspending
Higher insurance premiums
Person who agrees to take responsibility if you don’t meet your loan payments
Co-signer
Companies that prepares your credit worthiness and reports it
Credit bureau
What are three ways to raise credit score?
Correct outdated and incorrect information on your credit report
Consistently make timely payments
Reduce your total debt
Develop a longer credit history
Include a mix of types Credit, not just credit cards
Close accounts that you haven’t used recently
What are three strategies or ways to reduce debt?
Set up debt repayment plan
Obtain a debt consolidation loan at a lower interest rate
Take a second job specifically earmarked to pay down debt
Develop a zero based budget
Love with family or friends to reduce expenses
Sell assets
Lenders must provide you with full and truthful information
Truth in lending act
What are three rights as a borrower?
Freedom from discrimination
Privacy of financial information
Know why you were denied credit
Fair and respectful debt collection
Accuracy of reported credit info
Correcting information on your credit report
Legal act of requesting that debt be relieved. Stays on credit report for 10 years
Bankruptcy
This type of bankruptcy requires the liquidation of most assets
Chapter 7 Bankruptcy
This type of bankruptcy allows you to generally keep all assets
Chapter 13 Bankruptcy
Plastic card printed with an account number and identifying the holder as a person who has entered into a revolving credit agreement with a lender
Credit Card
Borrowing cash for a transaction
Cash advance
Issued by a bank and is typically run through Visa, Mastercard, AmEx, or Discover.
Bank Credit Cards
