personal finance 2

What is the best description of credit?

Money that you borrow and repay later.

Which financial tool helps build a credit score?

A credit card.

What is the principal of a loan?

The amount of money originally borrowed.

What is an example of revolving credit?

A credit card.

What is the consequence of only paying the monthly minimum payment?

The borrower stays in debt longer and interest accrues over time.

Which type of debt is backed by collateral?

Secured debt.

What is a variable-rate loan?

A loan with an interest rate that can change over time.

Why are payday loans considered risky?

They involve extremely high fees and interest rates.

Which factor usually lowers a monthly auto loan payment?

Making a large down payment.

What is the purpose of the Schumer Box?

To clearly and transparently show the key terms, interest rates, and fees of a credit card.

What is the formula for calculating net worth?

\text{Net Worth} = \text{Assets} - \text{Liabilities}

How can someone under the age of 21 start building credit?

By becoming an authorized user, obtaining a secured credit card, or using a cosigner.

What is the difference between a fixed-rate and an adjustable-rate mortgage?

A fixed-rate mortgage has an interest rate that stays the same, while an adjustable-rate mortgage can change.

What are three reasons to use a credit card instead of cash?

Building credit history, earning rewards, and fraud protection.

What is a primary advantage and disadvantage of Buy Now, Pay Later (BNPL)?

The advantage is spreading payments over time; the disadvantage is that it makes it very easy to overspend.