Questions and Answers
What is a loan shark?
What is credit?
The granting of a loan and the creation of debt; any form of deferred payment.
What is an interest rate?
The percentage of principal charged by the lender of money.
What does interest refer to in finance?
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What is debt?
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What does paycheck to paycheck mean?
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What is personal finance?
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What is a consumer?
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What is the national student loan debt?
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What is the average national credit card debt?
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What was The Great Depression?
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What was The New Deal?
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How did World War II help The Great Depression?
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What does Sallie Mae do?
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Banks got into the credit business before ________ because charging exceptionally high interest rates was legal.
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Personal finance is all the financial decisions a(n) _______________ must make in order to earn, budget, save, spend, and give money over time.
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Avoiding debt can lead to ________________ and hope.
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After ________________ the demand for products increased, and people began getting credit without loan sharks.
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Personal finance is 20%________ and 80% ________.
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How has the use of credit evolved in American culture?
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Study Notes
Credit and Debt Terminology
- Loan Shark: Individual or entity that charges excessive interest rates above legal limits.
- Credit: The provision of loans and creation of debt; involves deferred payments.
- Interest Rate: The percentage charged by a lender on the principal amount borrowed.
- Interest: The extra cost incurred for borrowing money, beyond the principal.
- Debt: Amount of money owed by one party to another.
Financial Concepts
- Paycheck to Paycheck: Describes individuals or families whose entire monthly income is spent on expenses, with minimal savings.
- Personal Finance: Represents all financial decisions made by an individual or family regarding earning, budgeting, saving, spending, and donating money.
Economic Context and Facts
- Consumer: A person or organization utilizing goods or services.
- National Student Loan Debt: Stands at approximately $1.5 trillion, highlighting the scope of educational borrowing.
- Average Credit Card Debt: The typical U.S. credit card debt per borrower averages around $3,366.
Historical Background
- The Great Depression: An economic downturn initiated by the 1929 stock market crash, lasting throughout the 1930s.
- The New Deal: A set of reforms introduced by Franklin Roosevelt’s administration between 1933-1942 aimed to combat the effects of the Great Depression.
- Impact of World War II: Contributed to economic recovery during the Great Depression by generating job opportunities.
Modern Credit Systems
- Sallie Mae: The Student Loan Marketing Association that guarantees federal student loans and manages $180 billion in loans for about 10 million borrowers.
- Credit Regulation: Banks began engaging in credit operations legally before 1920 due to permissive interest rate policies.
Financial Literacy Insights
- Personal Finance Structure: Comprised of 20% theoretical knowledge and 80% behavioral application.
- Benefits of Avoiding Debt: Promotes financial freedom and stability.
- Post-World War I Credit Accessibility: Demand for products surged post-war, enabling easier access to credit without reliance on loan sharks.
- Cultural Acceptance of Credit: Historically, using credit was frowned upon, but it has evolved into a standard practice within American society.
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Description
Explore important terminology related to credit and debt with these flashcards. This quiz covers key concepts such as loan sharks, interest rates, and the fundamentals of credit. Enhance your understanding of financial principles and their historical context.
