10 Questions
Which type of credit is obtained for one's personal use?
Personal and consumer credit
What is the main difference between a regular charge account and a revolving charge account?
Regular charge accounts require the full balance to be paid off each month, while revolving charge accounts allow the balance to be carried over.
Which type of personal credit is obtained from doctors, lawyers, dentists, and other professionals?
Service credit
What is the main purpose of personal loans according to the text?
To purchase expensive consumer items
Which type of personal credit allows you to pay a specific amount of money over a specific period of time?
Installment plan
What does the Truth in Lending Act aim to protect citizens from?
Unfair billing practices
Personal credit criteria can include the length of time a person has lived in an area, which is based on:
Permanence in one place
What does 'Finance charge' include as per the Truth in Lending Act?
Interest, fees, service charges, discounts
Under the Lending Act, a homeowner's personal creditworthiness might be determined by:
The length of time lived in the area
What is the primary focus of the REPUBLIC ACT NO. 3765, also known as the Truth in Lending Act?
Full disclosure of credit costs
Study Notes
Classification of Credit
- Classified according to the status of the debtor: ability to pay obligations
- Classified according to the time period: duration of credit
- Classified according to purpose: reason for obtaining credit
Personal and Consumer Credit
- Obtained for personal use
- Three types:
- Service Credit: obtained from professionals (e.g. doctors, lawyers)
- Retail Credit: goods obtained on retail, with three categories:
- Regular charge account: buy and pay later (e.g. credit card)
- Revolving charge: open credit line with a credit limit (e.g. credit card or line of credit)
- Installment plan: pay specific amount over a specific period (e.g. mortgage, car loan, tuition fees)
Personal Loans
- Granted for purchasing expensive consumer items
- Criteria for granting:
- Income/Resources
- Employment and Personal Resources
- Wealth and accumulated Resources
- Person's wealth and income
- Expenses and operating expenses
- Additional sources of income and family size
- Occupation and permanence
- Length of employment and residence
Lending Act (Republic Act No. 3765)
- Designed to protect consumers against unfair billing practices
- Requires disclosure of finance charges in connection with extensions of credit
- Known as the "Truth in Lending Act"
- Declaration of Policy: to protect citizens from uninformed use of credit
- Definitions:
- "Credit" includes various forms of loans, contracts, and arrangements
- "Finance charge" includes interest, fees, service charges, and other incident charges
- "Creditor" means any person engaged in the business of extending credit
This quiz covers the classification of credit based on the status of the debtor, time period, and purpose of obtaining credit. It also discusses personal and consumer credits and their types such as service credit.
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