Personal Finance

Front 1

When should credit be avoided?

Back 1

****When a product is not needed or wanted, resist the sales pressure to buy immediantly.

When something can be bought with cash.****

Front 2

Closed Ended Credit

Back 2

Specific purpose and amount such as a mortgage.

Front 3

Open Ended Credit

Back 3

Spent freely as long as it doesn't exceed credit line such as a credit card.

Front 4

Inexpensive loans

Back 4

Family, money borrowed on financial assets, U.S Department of Education

Front 5

Medium Priced Loans

Back 5

Banks and other financial institutions

Front 6

Expensive Loans

Back 6

Checks, Finance Companies, Tax refund loan

Front 7

Cash Advance

Back 7

loan billed to credit card which has high interest. Only use in emergency

Front 8

Finance Charge

Back 8

total dollar amount to pay for credit

Front 9

Truth in Lending Law

Back 9

****creditors state cost of borrowing in dollar amount****

Front 10

Annual Percentage Rate(APR)

Back 10

Percentage cost of credit on yearly basis

Front 11

People choose longer term financing(smaller payments). What is the effect of this?

Back 11

****longer term at given interest rate will cause an overall higher cost than short term, low payments.****

Front 12

What is the effect of low fixed payments with large final payment?

Back 12

****Can increase cost of borrowing because of more risk****

Front 13

Variable interest rate

Back 13

based on rates of banking system. Share interest rate with lender so lower initial interest rate.

Front 14

Secured Loan

Back 14

pledge property or other assets as collateral. Will get lower interest rate on loan

Front 15

Up-Front Cash

Back 15

Pay cash for large portion and creditors will believe you will be more likely to repay loan. Better chance of getting terms you want but would lose interest you could have earned in a savings account.

Front 16

Shorter Term

Back 16

Shorter the period of time for which you borrow, the smaller the chance that something will prevent from repaying. Borrow at lower interest rate if if short term loan but higher payments.

Front 17

Simple Interest

Back 17

Interest computed on principal only and without compounding. Dollar cost of borrowing money.

Front 18

Declining balance method

Back 18

More than one payment on simple interest loan

Front 19

Add-on interest method

Back 19

interest is calculated on full amount of original principal

Front 20

Adjusted Balance Method

Back 20

charges left after balance subtracted

Front 21

Previous Balance Method

Back 21

Charges with no credit for payments

Front 22

Average Daily Balance Method

Back 22

weighted average of account balance

Front 23

Rule of 78s

Back 23

Determine how much interest has been paid in the term so far

Front 24

Credit Insurance

Back 24

ensures repayment of loan if borrower can't pay

Front 25

Fair Debt Collection Practices Act

Back 25

Prohibits certain practices that collect debts

Front 26

Consumer Credit Counseling Services

Back 26

****local organization that focuses on debt counseling****

Front 27

Bankruptcy Abuse Protection and Consumer Protection

Back 27

pay off portion of debt

Front 28

Chapter 7 Bankruptcy

Back 28

Most debts are forgiven not including alimony, child support, fines, educational loans, and malicious acts

Front 29

Chapter 13 Bankruptcy

Back 29

plan for extinguishing debts from future earnings or property over a period of time. Must pay court costs, attorney fees, and trustee fees.

Front 30

Chapter 11 Bankruptcy

Back 30

Business bankruptcy reorganization request.