Shared Flashcard Set

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Personal Finance
Chapter 6 Credit
23
Finance
Undergraduate 1
10/18/2011

Additional Finance Flashcards

 


 

Cards

Term
Reasons For Using Credit
Definition
1. Convenience
2. Emergencies
3. Make Reservations (or holds) Credit Card Blocking
4. To own expensive products sooner
5. To take advantage of free credit
6. Protection against reip-offs and frauds
7. to obtain an education
Term
Best reast for using credit
Definition
(7) Obtain an education
Term
What is the negative aspect of credit?
Definition
1. Use of credit reduces financial flexibility.
2. Overspending
3. Possiblity of predatory lending
4. Interest is expensive, so is finance charges
Term
APR
Definition
Annual Percentage Rate
Term
Usury Laws
Definition
(Small loan laws) establish max laon amounts, interest rates, and credit-related fees for different types of loans from various sources.
Term
Debit Limit
Definition
overall max you believe you should owe basedon your ability to meet repayment obligations.
Term
debt payments-to-disposable income method
Definition
Percentage of disposable personal income available for regular debt repayments aside from set obligations.
Term
Disposable Income
Definition
Amount of income remaining after taxes and withholding for such purposes as insurance and union dues.
Term
Debt-to-equity ratio
Definition
ratio of your consumer debt to your assets
Term
Equity
Definition
A persons assests (the amount by which the value of those assets exceeds debts), excluding the value of a primary residence and thefirst mortgage on that home.
Term
Continuous Debt Method
Definition
If you are unable to get completely out of debt every 4 years you lean on debt too heavily.
Term
The Credit Approval Process
Definition
1. Apply for Credit
2. Lender obtains your credit report
3. Lender Decidees to accept or decline
Term
Pomissory Note
Definition
is a credit agreement for a loan.
Term
Tiered Pricing
Definition
Credit scoring allows lenders to categorize credit users according to the perceived level of risk.
Term
Build Credit History
Definition
1. Establish both checking / savings acct
2. Have utilities billed in your name
3. Request, acquire, and use oil company credit cards
4. Apply for a bank credit card
5. Ask a bank for a small, short term cashloan
8. Pay off student loans
Term
FCRA - Fair Credit Reporting Act
Definition
requires taht reports contain accurate, relevant, and recent information and that only bona fide users be permitted to review a file for approved purposes.
Term
Describe the common sources of consumer loans?
Definition
1. Banks
2. Sales Finance Company - seller-related lender (GMAC) whose primary business is financing the sales of it's parent company.
3. Cusumer Finance Companies - Citifinancial ex. - small loan companies
4. Stockbrokers to clients
5. Insurance Companies to policyholders
Term
Overindebtedness - 10 signs
Definition
1. Exceeding debt limits and credit limits
2. Not knowing how much you owe
3. Running out of money
4. Paying only the min amt due
5. Requesting new credit cards and increases in credit limits
6. Paying late or skipping credit paymetns
7. Takign add-on loans
8. Using debt-consolidation loans
9. Experiencing garnishment (court ordered)
10. Experiencing repossession or foreclosure.
Term
FDCPA Fair Debt Collection Practices Act
Definition
Prohibits third party debt collection agencies from using abusive, decptive, and unfair practices in thelegitimate effort to collect past-due debts.
Term
Steps to get out of debt
Definition
1. Determine your account bal and payments
2. Focus your budget on debt reduction
3. Contact your creditors
4. Take on no new credit
5. Refinance - if it lowers interest rates
6. Avoid bad help
7. Find GOOD help - credit counselors (CCA) create a DMP or Debt management plan - arrangement whereby the conumer provides one monthly payment which is distributed to all creditors
2.
Term
Bankruptcy
Definition
LAST RESORT. Must complete credit counseling first. Some debts are never excused or (Discharged debts). Stays on credit for 10 years.
Term
Chapter 13
Definition
known as wage earner or regular income plan is designed for individuals with regular incomes who might be able to pay off some or all of their debt gien certain protections by the court, repayment usually lasts 3-5 years.
Term
Chapter 7
Definition
Immediate Liquidation Plan or straight bankruptcy - ALL assets are given to the trustee. All assets serving as collateral forloans are turned over to the appropriate creditors. Most remaining assets are sold. Cannot use again for at least 6 years after first bankruptcy.
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