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Credit/Loan Basics

100

True false- Paying your bills late will not affect your credit score

false

200

1. Each of the following financial products will help you build credit history EXCEPT: 

2. Secured credit card

3. Debit card

4. Home mortgage

5. Credit card

debit card

300

True false- Credit cards pull money directly from your bank account, while debit cards get their money from Visa or Mastercard. 

False- debit is your own money, credit is from a bank or financial institution

400

Why is it often a good idea to pay more than the monthly amount due on an amortized loan?

The extra payment will be applied to the principal amount you owe, which will pay down your debt more quickly.

500

Ashton needs to get his car fixed in order to get to work, and he doesn't have an emergency fund or enough cash in his account to pay for the repair, which costs $975. Which option that we talked about in class is likely the WORST financial decision to solve his problem?

Take out a payday loan

Credit Cards

100

What determines your interest rate for your credit card?

Your credit score and/or credit history

200

You should strive to be a credit card deadbeat. Why?

yes, so you dont pay any interest and can still receive benefits

300

Which credit card payback strategies would result in your paying the HIGHEST amount of interest

Paying the minimum payment for the entire length of your balance

400

A credit card offer comes in the mail with the bold print "0% A.P.R. for New Accounts."   Which important piece of information should you find before thinking about signing up?

What is the APR after the introductory period

500

What financial product am I? I am a type of credit card that requires cardholders to make a security deposit equal to the credit limit on their account. Due to this deposit requirement, I am often a good choice for young people looking to establish their credit history.

secured credit card

Personal/student loans

100

How  should student loans should be used responsibly during college

For payment of college related expenses like tuition, room, and board, and you can use them to pay other costs of attendance such as books, fees, and transportation. 

200

Personal loans are called "personal loans" because...

they are lent based on your personal credit history rather than secured by an asset like a house or car.

300

What types of repayment plans does the federal government offer for student loans? 

The Federal government offers numerous loan repayment plans, including standard, income-based, and graduated payments

400

23. If you are having trouble making loan or credit card payments, which recommendation below represents the LEAST useful piece of advice?

1. Find an extra source of income by taking a second job, working longer hours, asking for a raise, etc
2. Stop making payments on some of your debts so you can focus on getting the most expensive or largest debts under control
3. Call your lenders and see if you can negotiate lower monthly payments, lower interest rates, or longer terms
4. Reduce spending in some other area of your budget so you can direct more funds toward debt payments

Stop making payments on some of your debts so you can focus on getting the most expensive or largest debts under control

500

25. 
    If Suzanne applies for and receives a loan on a peer-to-peer lending website, who is supplying the funding to Suzanne?

1. An investor hoping to make money on her interest payments
2. A friend or family member who trusts her to repay the funds
3. The Federal government, funding the loan with tax dollars
4. People who have received a loan in the past on the website and are now "paying it forward"

1. An investor hoping to make money on her interest payments

Auto/Home Loans

100

Which of the following is most likely to represent a fixed rate, secured debt?

1. A home equity line of credit
2. A credit card
3. A peer-to-peer loan
4. A dealer financed auto loan

• A dealer financed auto loan

200

True/False 

Home equity loans or lines of credit are not available to renters

true- you must own a home to have equity to borrow against

300

Amy and Chuck each buy a house in the same neighborhood for $250,000. Amy's monthly mortgage payment is $400 more per month than Chuck's. 

What factors make that possible?

shorter term, lower interest rate due to better credit score, mortgage type, etc

400

20. Each of the following is an advantage to leasing a car EXCEPT?

1. Monthly leases are frequently lower than a car payment would be on a loan for the same car.
2. Lease payments are not reported to the credit agencies, so it's not as bad to miss a payment or two.
3. Leases allow you to get a newer model car more frequently than the typical car loan would.
4. Leases are typically short enough that the car stays under warranty for many repairs or service appointments.

Lease payments are not reported to the credit agencies, so it's not as bad to miss a payment or two.

500

Elizabeth is considering buying a $30,000 car. Which financing option would have the LOWEST expected monthly payment and the HIGHEST expected total interest payments?

1. $0 down payment, 6% interest, 60 months
2. $0 down payment, 6% interest, 84 months
3. $3000 down payment, 6% interest, 60 months
4. $3000 down payment, 0% interest, 36 months

1. $0 down payment, 6% interest, 84 months

General

100

24. Which statement accurately describes a revolving line of credit?

1.  You owe the same payment every month
2. You can buy additional items as you need them without getting approval for each purchase
3. They do not charge interest
4. One common example is a car auto loan

1. You can buy additional items as you need them without getting approval for each purchase

200

12. You see on a commercial that OrangeCo is offering a credit card with a 5% cashback program for all cardholders. Which question might help you evaluate how good this offer is?

1. Does the cashback program apply to all purchases or only specific types of purchases like gas and groceries?
2. Can I get a debit card along with a new credit card?
3. Who does OrangeCo use as their spokesperson in the commercial?
4. Do I still get the cash back even when I return my purchases to the store?

1. Does the cashback program apply to all purchases or only specific types of purchases like gas and groceries?

300

What statement about credit cards is TRUE?

1. They can help you establish a credit history
2. Since they are tied directly to your checking account, they prevent you from spending money you do not have
3. If you need to carry a balance, the interest rates are generally quite low (less than 5%)
4. As long as you make the minimum payments it's like getting a short-term interest free loan

• They can help you establish a credit history

400

Reading through a credit card disclosure (aka the Schumer Box), you see the A.P.R. for a specific card is set at 9.99% - 23.99%. Which of the following statements is probably TRUE?

1. When given a range of A.P.R.s like this, you can assume most cardholders pay the lowest rate listed
2. One of the primary factors determining your card's A.P.R. is your credit score
3. With credit card A.P.R.s, cardholders like higher A.P.R.s because they earn more
4. The A.P.R. on credit cards is usually fixed so they won't be adjusted as long as you are a cardholder

One of the primary factors determining your card's A.P.R. is your credit score

500

Best Bank's Visa credit card discloses an A.P.R. of "Prime Rate + 5.74% to Prime Rate + 22.74%." If the Prime Rate increases from 3.25% to 4.25%, what impact would this have on A.P.Rs for cardholders?

1. No change since credit card A.P.Rs don't change as long as your account is open
2. Increase in A.P.R by 1%
3. Decrease in A.P.R. by 1%
4. Increase in A.P.R. by 22.74%

Increase in A.P.R by 1%