Questions and Answers
If a loan is not repaid, the ____ of the borrower—used as security for the debt—could be sold by the lender.
collateral
What indicates the likelihood of someone repaying debt?
credit score
What reports on a person's credit history?
credit bureau
The amount of time you have to pay back a loan is called the _____ of the loan.
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When an item is worth less than what you owe on it, that's called_____?
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Making fixed payments on a loan over a set period of time is an example of _____?
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When an asset loses value over time, that's called_____?
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When you fail to repay a loan on time, you're referred to as being in _____?
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The first step of the debt snowball method is to list all your debts_____?
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Checking your credit report regularly can help you spot any signs of_____?
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Which of these is not one of the main credit bureau reporting agencies?
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With a debit card, you can do everything you can do with a credit card except what?
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A clothing store credit card is an example of what type of debt?
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Which of the following is not factored into the loan payment on a new car?
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Predatory lenders use all of the following to prey on desperate people except...
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Which of these isn't a marketing tactic to get you to use credit?
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Why is a high credit score not an indication that you're winning with money?
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Study Notes
Credit and Debt Terminology
- Collateral: Asset used by the borrower as security for a loan, which can be sold by the lender if the loan is not repaid.
- Credit Score: Numerical representation indicating the likelihood of an individual repaying their debt.
- Credit Bureau: Organization that compiles and reports on an individual's credit history.
- Loan Term: Duration within which a loan must be repaid.
- Negative Equity: Situation where an item’s value is less than the outstanding debt owed on it.
Types of Credit
- Installment Credit: Fixed payments scheduled over a set period for a loan.
- Revolving Credit: Credit that allows borrowing amounts up to a credit limit, exemplified by store credit cards.
Financial Concepts
- Depreciation: Gradual loss of an asset's value over time.
- Default: Consequence of failing to repay a loan on time.
Debt Management Strategies
- Debt Snowball Method: First step involves listing debts from smallest to largest to prioritize payments.
Financial Monitoring
- Regularly checking your credit report aids in identifying potential signs of identity theft.
Credit Reporting Agencies
- Main credit bureaus: Equifax, TransUnion, Experian. Identifax is not a recognized reporting agency.
Payment Methods
- Debit Card: Allows transactions without incurring debt, unlike credit cards.
- Loan Payment Factors: The loan payment for new cars includes term, interest, and principal but does not factor in equity.
Predatory Lending Awareness
- Predatory lenders utilize unfair practices and deceptive tactics but do not rely on truthful logic.
Credit Marketing Tactics
- Common tactics include 0% interest offers, cash back incentives, and introductory offers. A 50% off sale is not a credit marketing tactic.
Misconceptions about Credit Scores
- A high credit score may indicate a significant amount of debt, not necessarily financial success or winning with money.
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Description
Test your knowledge of key terms and concepts related to credit and debt in this review of Chapter 4. Learn about important vocabulary such as collateral, credit scores, and credit bureaus, and enhance your understanding of financial responsibility.
