Note
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ITB chapter 18 vocab
credit | the privilege of using someone else's money for a period of time. |
finance charge | the total dollar cost of credit, including interest and all other charges. |
down payment | payment of part of the purchase price. |
installment loan | you agree to make monthly payments in specific amounts over a period of time. |
promissory note | a written promise to repay based on a debtor's excellent credit history. |
collateral | property that is used as security. |
cosigner | responsible for paymehnt of the note if you do not pay as promised. |
credit rating | a person's reputation for paying bills on time. |
interest | the cost of borrowing money. |
annual percentage rate | a disclosure required by law that states the percentage cost of credit on a yearly basis. |
credit application | a form on which you provide information needed by a lender to make a decision about granting credit. |
credit bureau | a company that gathers information on credit users. |
statement of account | a record of the transactions completed during the billing period. |
credit counselor | discusses and suggests actions to take to reduce spending and eliminate credit difficulties. |
bankruptcy | the legal process of reducing or eliminating an amount owed. |
Large purchases (such as a car, RV, or boat) are commonly bought using?
trade credit
a bank credit card
installment credit
a charge account
Question 3
Signing a promissory note occurs when using
a loan
a checking account
a credit card
a charge account
Question 4
Which of the following is an advantage of using credit?
convenience
higher prices
overbuying
lower credit rating
Question 5
The principal of a loan is the total amount of interest that will be paid.
True
False
Question 6
Interest rates are stated on the basis of one year even if a loan is for several years.
True
False
Question 7
The most valuable number to consider when comparing credit among various borrowing sources is the
maturity date
principal
annual percentage rate
total finance charge
Question 8
Calculate the amount of interest for the following loan...
$7,000 borrowed for 3 years at 6%
$1260
Question 9
A reputation for paying bills on time relates to a person's
capacity
collateral
capital
character
Question 10
The main activity of a credit bureau is to
determine when a person is overusing credit
report information on the use of credit by consumers
calculate the cost of credit for lenders and borrowers
contact a government agency when lenders overcharge for credit
Question 11
A person may be denied credit on the basis of his or her
income
age
gender
type of job
Question 12
The federal law that provides protection when an error occurs on a monthly statement is the
Equal Credit Opportunity act
Fair Credit Reporting Act
Fair Credit Billing Act
Truth-in-Lending Law
Question 13
The legal process of reducing or eliminating an amount owed is
credit reporting
bankruptcy
credit
financing
Question 14
List and explain the three C's of Credit.
capital- things that you value that you own
charecter- how responsible you are to make payments on time
capacity - your income and how capible you are to make payments
What are the major types of consumer credit?
Trade credit, sales, instalments, and loan
What are the main advantages of consumer credit?
That you can buy at the same time you pay
What are the potential drawbacks of buying on credit?
fees , credit drawbacks, service charge
How does time affect the amount of interest that you pay?
The longer you wait the higher the interest
Large purchases (such as motorcycles and automobiles) are commonly bought using
A bank credit card
Installment credit
A charge account
Trade credit
6. Signing a promissory note occurs when using
A credit card
A charge account
A loan
Trade credit
7. Which of the following is an advantage of using credit?
Overbuying
Convenience
Higher prices
Lower credit rating
What is the main purpose of a credit bureau?
To provide info regarding people's credit
What are the main items reported on a statement of account?
Record of transactions,balance when due,amounts charged, current balance, minimum balance and next payment
A reputation for paying bills on time relates to a person’s
Capacity
Collateral
Character
Capital
5. The main activity of a credit bureau is to
Calculate the cost of credit for lenders and borrowers
Determine when a person is overusing credit
Contact a government agency when lenders overcharge for credit
Report information on the use of credit by consumers
What three things are necessary to calculate interest?
Principal, Interest, Time
What does APR represent?
APR represents the annual cost of borrowing money, including the interest rate and any associated fees.
What is an Amortization Schedule?
An amortization schedule is a table that outlines the periodic payments of a loan, showing the breakdown of principal and interest paid in each installment until the loan is fully repaid.
True or False: The principal of a loan is the total amount of interest that will be paid.
True or False: Interest rates are stated on the basis of one year even if a loan is for several years.
The most valuable number to consider when comparing credit among various borrowing sources is the
Total finance charge
Maturity date
Annual percentage rate
Principal
7. Calculate the amount of interest for each of the following loans.
$6,000 borrowed for 1 year at 7% APR $420
$2,000 borrowed for 4 months at 8% APR $53.33
$1,100 borrowed for 2.5 years at 6% APR $165