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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 |
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Best reast for using credit |
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What is the negative aspect of credit? |
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1. Use of credit reduces financial flexibility. 2. Overspending 3. Possiblity of predatory lending 4. Interest is expensive, so is finance charges |
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Term
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(Small loan laws) establish max laon amounts, interest rates, and credit-related fees for different types of loans from various sources. |
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overall max you believe you should owe basedon your ability to meet repayment obligations. |
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debt payments-to-disposable income method |
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Percentage of disposable personal income available for regular debt repayments aside from set obligations. |
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Amount of income remaining after taxes and withholding for such purposes as insurance and union dues. |
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ratio of your consumer debt to your assets |
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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. |
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If you are unable to get completely out of debt every 4 years you lean on debt too heavily. |
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The Credit Approval Process |
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1. Apply for Credit 2. Lender obtains your credit report 3. Lender Decidees to accept or decline |
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is a credit agreement for a loan. |
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Credit scoring allows lenders to categorize credit users according to the perceived level of risk. |
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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 |
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FCRA - Fair Credit Reporting Act |
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requires taht reports contain accurate, relevant, and recent information and that only bona fide users be permitted to review a file for approved purposes. |
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Describe the common sources of consumer loans? |
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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 |
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Overindebtedness - 10 signs |
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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. |
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FDCPA Fair Debt Collection Practices Act |
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Prohibits third party debt collection agencies from using abusive, decptive, and unfair practices in thelegitimate effort to collect past-due debts. |
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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. |
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LAST RESORT. Must complete credit counseling first. Some debts are never excused or (Discharged debts). Stays on credit for 10 years. |
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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. |
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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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