Credit Basics
Which of these does not factor into your credit score?
a. Payment history
b. Amount of debt
c. New lines of credit
d. History of payday loans
D
You need money now to cover your bills, so you get a quick loan that is due in two weeks. The interest rate charges you daily fees at higher rate than normal. What type of loan is this?
Payday loan
What is depreciation in terms of cars?
Depreciation is the decrease in the value of an asset over time.
Which of these would you NOT find on a student aid report for FAFSA?
a. Federal Unsubsidized Student Loan
b. Private Student Loans
c. Pell Grant
d. Federal Subsidized Student Loan
B
Of the 3 C's, which is the measure of how much debt you can repay?
Capacity
What is a credit card grace period?
The length of time before interest is applied to purchases
A secured loan is a loan backed by collateral that the lender can seize if the borrower defaults. An example is a mortgage, where the house serves as collateral.
What is a variable interest rate?
Interest rate may change over time.
How do grants, scholarships, and work study reduce the cost of college?
These are all "free money" to use towards your degree that are awarded based on financial need or other things
What is a credit report and why should you check it?
It covers all history of your credit and payments of it and you should check it to make sure there aren't any issues
What is revolving credit and give an example
What is an unsecured loan and give an example
An unsecured loan is a loan that does not require collateral. An example is a personal loan or credit card debt.
What is a fixed interest rate and give a pro to it.
Same interest rate throughout the loan
Stability in monthly payments.
Predictable budgeting over the loan term.
Good for long-term homeownership plans.
What is a subsidized student loan?
Subsidized student loans are need-based loans where the government pays the interest while the borrower is in school
How can a young adult build credit responsibly?
by obtaining a credit card, using it for small purchases, paying off the balance in full each month, and making timely payments.
Why is using credit as part of your purchasing habits dangerous?
Using credit irresponsibly can lead to debt accumulation, high-interest payments, and financial instability, as consumers may spend beyond their means and struggle to repay borrowed amounts.
What does APR stand for and how does it affect your outstanding balance.
APR stands for Annual Percentage Rate. It represents the annual cost of borrowing and affects your outstanding balance by determining how much interest will be charged on the unpaid balance.
What makes an auto loan a secured loan?
The loan is backed by the vehicle itself, meaning the lender can repossess the car if the borrower fails to make payments
What is one reason you can be awarded a scholarship?
Merit, Athletics, Activities, Personal Information
What is it called when a lender checks your credit report and it gives a ding on your credit score?
Hard Inquiry
If I use a credit card, how can I avoid paying interest on purchases?
Pay it all off at the end of the month
How does Debt Snowball work?
You start with paying off the smallest debt and add that payment onto the next largest debt and when that's paid off you add those to the next payment and so on
How can the length of an auto loan affect the total cost of the loan
It will increase the total amount of interest paid over the life of the loan
What does FAFSA stand for?
Free Application for Federal Student Aid
Explain the difference between Debt Snowball and Debt Avalanche
Debt snowball focuses on paying off the smallest debts where Debt avalanche focuses on paying off the debt with the biggest interest rate