Credit

Name the 3 main components of a loan.

Principal, interest rate, and loan term

What factors affect your interest expense and the rate on a loan?

Good credit score, larger down payment, cosigner with good credit, open a credit card

How do you calculate someone's Net Worth?

Assets minus Liabilities equals Net Worth

Define and give examples of Assets.

Own - example: value of your home, car, bank accounts, cash, retirement accounts

Define and give examples of Liabilities.

Owe - example: loan on house (mortgage) or car, credit card debt, student loan.

What are the advantages of having a high credit score?

More likely to be approved for credit/loan, get a lower rate, have positive outcomes: applying for a job, telecommunication svcs (phone, internet)

What is the scale (minimum to maximum) of a credit score?

300-850

Advantage of having a credit card is . . .

Avoid carrying cash, can use with emergencies, can build points (cash back, mileage/air)

How can you avoid paying any interest or fees on credit cards?

Pay the balance in full every month and pay on time

What is a Credit Score?

A numerical representation of a person's creditworthiness

Name the 3 credit reporting agencies

Experian, Equifax, and TransUnion

What happens to the monthly payment when you make a bigger down payment?

It goes down

What happens to the monthly payment when you are given a lower interest rate?

It goes down

What happens to the monthly payment when you extend the term (more years) of the loan?

Each payment is lower.

What happens to the monthly payment when you pay more than the minimum due each month?

You pay more each month.

What happens to the total cost of the car/house when you make a bigger down payment?

You pay less overall.

What happens to the total cost of the car/house when you are given a lower interest rate?

The total cost is lower because the interest paid is less.

What happens to the total cost of the car/house when you extend the term (more years) of the loan?

It goes up

What happens to the total cost of the car/house when you pay more than the minimum due each month?

It goes down

What are some common terms (# of months/years) for a mortgage?

15, 20 or 30 years

Revolving credit

Open line of credit, payment varies. Ex. Credit card

Secured debt

Tied to asset, repossessed if no payment. Ex. Mortgage, auto loan, small bus.

Unsecured debt

Not tied to asset, no collateral. Ex. Credit card, personal loan/payday

Variable-rate

Interest rate changes based on prime rate or index rate. Ex. Credit card, home equity/line of credit

Fixed-rate

Interest rate remains constant. Ex. Payday loan, student loan, auto loan

Installment loans

Specific purchase, regular payments. Ex. Mortgage, auto or student loan

Disadvantage of a credit card is . . .

charge more than you can afford, never pay it down/off if can't make large payments or do not pay in full (interest is so high that you're not paying any principal, get into debt)

What is the purpose of the 3 credit reporting agencies?

Calculate your credit score, give it when asked/inquiries (banks, ins. co., employers). Help you correct any errors

What are some common terms (# of months/years) for a car?

3-6 years (36-72 months)

The next day we have off is ...

April 3rd

Good credit score

750

The last day that we had off was . . .

February 23

Not such a good credit score

650

Ms. Galambos' birthday is on . . .

April 7th