18 terms

Personal Finance Ch. 4

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Terms in this set (...)

Annual Percentage Rate
Cost of borrowing money on an annual basis; takes into account the interest rate and other related fees on a loan
Depreciation
A decrease or loss in value
Credit Report
A detailed report of an individual's credit history
Loan Term
Time frame that a loan agreement is in force, and before or at the end of which the loan should either be repaid or renegotiated for another term
Credit Card
Type of card issued by a bank that allows users to finance a purchase
Credit Score
A measure of an individual's credit risk; calculated from a credit report using a standardized formula
Annual Fee
A yearly fee that's charged by the credit card company for the convenience of the credit card
Debt Snowball
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
You must establish credit in order to buy
a house.
False
If you are a victim of identity theft, you are only responsible for paying back half of the debt.
False
Which of the following is not a factor in determining a FICO score?
a. Paying cash for all purchases (This answer is correct.)
b. Getting a personal loan from a bank
c. Using credit cards
d. Taking out a mortgage on a house
Which of the following is not a good idea for getting out of debt?
a. Quite borrowing money
b. Get a part-time job or work overtime
c. Borrow money from your parents to pay off the debt (This answer is correct.)
d. Sell something
Which of the following things cannot be done with a debit card but can be done with a credit card?
a. Rent a car
b. Purchase something online
c. Go into debt (This answer is correct.)
d. Purchase an airline ticket
Why is an adjustable rate mortgage (ARM) a bad idea?
It's a bad idea because the bank can change your interest rate at any time.
Explain why financing a car is a bad idea.
Financing a car is a bad idea because the value of the car can go down and you will hand over more money because the interest rate.
Describe the negative consequences of taking on debt. What effect can debt have on your future?
For the future, debt will make you pay more over time when you could just pay it off.
What are some things you can do to protect your personal information?
You can change passwords whenever, nobody should know your social security code. Do not share any personal information.
Explain how the debt snowball works.
You pay you debt off from smallest to largest.
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