SECTION C EXAM

Finance charge

Finance charge

________: The total dollar amount you pay to use credit.

Grace Period

________: time period during which no finance charges will be added to your account.

Credit rating

________: A measure of a person's ability and willingness to make credit payments on time.

Diversification

Helps you limit your risk; you invest in multiple markets

Creditor

An entity that lends money

Closed end credit

Credit as a one time loan that you will pay back over a specified period of time in payments of equal amounts

Open end credit

Credit as a loan with a certain limit on the amount of money you can borrow for a variety of goods and services

Line of Credit

The maximum amount of money a creditor will allow a credit used to borrow

Grace Period

time period during which no finance charges will be added to your account

Finance charge

The total dollar amount you pay to use credit

Minimum monthly payment

Smallest payment to remain in good standing

DPR (income ratio)

can be used to calculate if you can afford a loan

monthly debt payment / monthly net income

YOU DON”T WANT THE PERCENTAGE TO BE MORE THAN 20%

Credit rating

A measure of a person's ability and willingness to make credit payments on time

Credit

An arrangement to receive cash, goods, or services now and pay for them later.

Portfolio

A collection of assets a person owns, typically including stocks, bonds, and cash.

Stock

A share in the ownership of a company

Risk

the degree of uncertainty and/or potential financial loss inherent in an investment decision.

Equity

The difference between the current market value of your home and the amount you still owe

Step 1: Before you shop

Step 1: Before you shop

• Identify your needs

• Gather Information

• Be Aware of the Marketplace

Step 2: Weighing the Alternatives

Step 2: Weighing the Alternatives

• Identify what is important to you

• Compare prices

• Comparison Shopping

Step 3: Making the purchase

Step 3: Weighing the Alternatives

• Identify what is important to you

• Compare prices

• Comparison Shopping

Step 4: After the purchase

Step 4: After the Purchase

• Maintenance and ownership costs

• Product support

• Rethink and Reevaluate your Decision

Character

Creditors ask for references to assess the kind of person you are before giving you money.

Capacity

• Creditors evaluate your income, debts, job, and salary to determine your ability to pay additional debts.

• They may ask about your sources of income.

Capital

• Creditors examine your assets and liabilities to ensure you have enough capital to repay the loan.

• Assets can be sold in case of income loss.

Collateral

• Creditors assess the properties and savings you have that can be used as collateral to secure the loan.

• If you default on the loan, they can keep the pledged collateral.

Credit History

• Lenders review your past credit usage to see if you handled credit responsibly.

• They obtain a credit report detailing your debt history.

• Credit rating is a measure of your ability and willingness to make credit payments on time, with 730 being considered a good score.