Types of Loans
A loan for a house
What is a mortgage?
Duke has a credit card with a $1,000 credit limit. His outstanding balance is currently $800. What is the maximum amount he can now spend on this credit card?
$200
The difference between a credit report and a credit score
A credit report is a detailed history of your credit activity, while a credit score is a three-digit number calculated from that report to summarize your creditworthiness.
Describe 1 pros and con of looking for getting a second job to help pay down debts faster.
Pro: Faster debt repayment
Con: Less personal time
Responsible use of credit cards can improve this number that lenders use to judge creditworthiness.
What is a credit score?
When loans are amortized, monthly payments are constant or variable?
Constant
Why would credit companies prefer that their cardholder make the minimum monthly payment rather than paying their total balance in full?
This enables the credit card company to make more money
A strategy to improve your credit score
Make on-time payments
Why is it better to establish credit when you're young?
You will likely need a credit history to rent your first apartment, finance your first car, or open a credit card
In an amortized loan, your monthly payments cover these two components.
What is principal and interest?
A loan with shorter term length will have ________(higher, lower) monthly payments, and you will pay _____ (more, less) in total interest
higher, less
- You can make emergency purchases that you don't have the money to pay for right now
- Building Credit History
- Enhanced Security and Fraud Protection
- Earning Rewards
300-850
Wages or tax refunds being garnished is a consequence of what action?
Not paying off your debts
A large sum of money you pay when taking out a mortgage so that the principal of your loan is smaller
What is a down payment?
This person agrees to take responsibility for your loan payments if you cannot pay.
What is a co-signor?
This type of payment method describes when you spend your own money from your bank account at the point of sale
What is a debit card?
An advantage of having having an excellent credit score
- Lower Interest Rates
- Loan Approval
- Higher Credit Limits
A strategy to manage debt
- Reduce spending
- Increase Income
- Make more than the minimum payment
A type of mortgage where interest rates fluctuates according to general market conditions
What are adjustable rate mortgages?
A loan backed by an asset you own is called a ___________ and an example can be a ____________.
Secured Loan / Mortgage or Auto loan
This type of payment method is when you borrow money as a loan from an issuer to make purchases
What is a credit card?
Name 2 items that show up on your credit report
- Personal information
- Payment History
- Loan activity
- Inquiries
If you have a credit card, what maximum percentage of your credit limit is it advised to spend?
30%
This person agrees to take responsibility for your loan payments if you cannot pay.
What is a co-signor?