Types of Credit
Something of value offered in order to ensure payment of a loan.
Collateral
What does APR stand for
Annual Percentage Rate
This type of Bankruptcy allows a business to continue running under court supervision while paying off restructured debts
Chapter 11
What two items make up the majority of your credit score?
- Current debt
- Payment History
Formula
Net Worth = Assets - Liabilities
What is another name for unsecured credit? Give an example of unsecured credit.
Uncollateralized
ex. credit card, student loan, personal loan
What type of financial institution is more likely to offer a lower APR on loans?
Credit Union
This type of bankruptcy is referred to as "straight bankruptcy"
Chapter 7
A late or missed payment can impact your credit score for how many years?
7 years
Give two examples of assets
- income
- home value
- car value
- MMAs, CDs
What is another name for a secured loan? Give an example of a secured loan.
Collateralized Loan
Ex. Mortgage, car loan
Simple Interest - only on the Principal amount
Compound Interest - on Principal and Interest Accrued
This type of bankruptcy is a "personal reorganization of debts"
Chapter 13
The higher your credit score, the ________ your interest rate
Lower
Give two examples of Liabilities
- Mortgage
- Car loan
- Student loan
- Personal loan
What type of credit is paid off over a certain period of time in regular (often monthly) payments?
Give an example
Installment Credit/Loan
Ex. Mortgage, Car
$1080
Name 3 debts that are not dischargeable when bankruptcy is declared
- tax debt
- student loans
- alimony, child support
- criminal fines and debts
- fraudulent debts
What are the 5 C's of creditworthiness
Who has greater net worth:
Person A: Home Value $300,000; Mortgage 250,000; Student Loan $70,000
Person B: Car Value $30,000; Home Value $150,000; Mortgage $90,0000
Person B
What type of credit can become available again or continue to be used as it is paid off?
Give an example
Revolving Credit
ex. credit card
Caitrin borrows 15,000 to buy a car. She will pay the loan off in 5 years, and was approved for a 4.5% interest rate. Calculate the total cost of her loan.
$18,375
Up to how many years is your credit damaged by bankruptcy?
10 years
What are the three credit bureaus?
Equifax, Transunion, Experian
Jessica has a home with a value of $450,000. She owes $300,000 on her mortgage. Her car is worth $4,500, and she has $42,000 in student loans. What is her net worth?
$112,500