Dave Ramsey Chapter 4 & 5 Review
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Questions and Answers

What determines a FICO Score?

  • Type of debt
  • Duration of debt
  • New debt
  • All of the above (correct)

    • What can be done with a credit card that can't be done with a debit card?

    Go into debt

    FCRA requires creditors to notify consumers if they deny credit based on a credit report.

    True

    What is the Drive Free Method?

    <p>Planning your purchase in advance using the sinking fund method and putting your savings in a mutual fund.</p> Signup and view all the answers

    What is the most cost-effective option for purchasing a home?

    <p>15 Year Fixed-Rate Mortgage</p> Signup and view all the answers

    You should have a ______% down payment on a mortgage.

    <p>10</p> Signup and view all the answers

    What does the Debt Snowball method involve?

    <p>Paying off your debts from smallest to largest.</p> Signup and view all the answers

    What is a Paycheck Garnishment?

    <p>A court-ordered attachment from a paycheck</p> Signup and view all the answers

    The Lottery Myth suggests that gambling can lead to wealth.

    <p>True</p> Signup and view all the answers

    Having a credit card means you have financially arrived.

    <p>False</p> Signup and view all the answers

    What does a Credit Score represent?

    <p>The risk of not repaying your debt.</p> Signup and view all the answers

    Information is removed from your credit report after ______ years.

    <p>7</p> Signup and view all the answers

    Bankruptcy stays on your credit report for ______ years.

    <p>10</p> Signup and view all the answers

    What defines a Loan Term?

    <p>Time frame that a loan agreement is in force.</p> Signup and view all the answers

    What does APR stand for?

    <p>Annual Percentage Rate</p> Signup and view all the answers

    What is Depreciation?

    <p>A decrease or loss in value.</p> Signup and view all the answers

    What is an Annual Fee?

    <p>A yearly fee charged by the credit card company.</p> Signup and view all the answers

    What is a Lease?

    <p>A long-term rental agreement on a car.</p> Signup and view all the answers

    What does it mean to be Upside-down in terms of debt?

    <p>When a person owes more on an item than it's worth.</p> Signup and view all the answers

    What is a Credit Card?

    <p>A card issued by a bank that allows users to finance a purchase.</p> Signup and view all the answers

    What is a Secured Loan?

    <p>A loan that requires collateral to guarantee the loan.</p> Signup and view all the answers

    What is an Unsecured Loan?

    <p>A loan based solely on a person's creditworthiness.</p> Signup and view all the answers

    What is an Introductory Rate?

    <p>A rate charged at the beginning of a loan that will generally increase over the term of the loan.</p> Signup and view all the answers

    The total estimated student loan debt outstanding is over ______.

    <p>$1 Trillion</p> Signup and view all the answers

    The average repayment period for a student loan is ______ years.

    <p>10</p> Signup and view all the answers

    What is the Fourth Foundation?

    <p>Pay cash for college.</p> Signup and view all the answers

    Percentage of college students that graduate with student loans is ______%

    <p>66</p> Signup and view all the answers

    The average millionaire reads ______ non-fiction book every month.

    <p>One</p> Signup and view all the answers

    You should fill out the FAFSA ______ while in college.

    <p>Yearly</p> Signup and view all the answers

    What does FAFSA stand for?

    <p>Free Application for Federal Student Aid.</p> Signup and view all the answers

    What is a Scholarship?

    <p>A form of financial aid that does not need to be repaid; given for academics, athletics, left-handedness, etc.</p> Signup and view all the answers

    What is Work Study?

    <p>A program that allows students to work part-time while continuing their studies.</p> Signup and view all the answers

    What is a Grant?

    <p>A form of federal or state financial aid that does not need to be repaid; based on need.</p> Signup and view all the answers

    What is Community College?

    <p>A two-year government-supported college that offers an associate degree.</p> Signup and view all the answers

    What is On-the-job-training?

    <p>Usually a professional trainer serves as the course instructor and uses a combo of hands-on activities and classroom training.</p> Signup and view all the answers

    What is Trade School?

    <p>Allows students to learn basic professional skills without having to take general education courses.</p> Signup and view all the answers

    What are Certifications?

    <p>May be free or low-cost; found online, at community colleges, or government programs.</p> Signup and view all the answers

    Who is an Entrepreneur?

    <p>A person that starts their own business.</p> Signup and view all the answers

    What does Cash-flow mean?

    <p>Pay as you go.</p> Signup and view all the answers

    The academic and financial choices you make after high school could affect your life for ______ years.

    <p>40</p> Signup and view all the answers

    What should you do when evaluating which college to attend?

    <p>Comparison shop.</p> Signup and view all the answers

    Study Notes

    Credit Score & Debt Management

    • FICO Score derives from factors like type, duration, and new debt.
    • Debt Snowball method involves paying off debts starting from the smallest to the largest.
    • Credit Score indicates risk level of not repaying borrowed money.
    • Bankruptcy remains on credit report for 10 years; negative information removed after 7 years.

    Loan Types & Mortgages

    • A 15-Year Fixed-Rate Mortgage is the most economical choice for home purchasing.
    • Down payment for a mortgage should be at least 10%.
    • Secured Loans require collateral; Unsecured Loans are based on creditworthiness alone.
    • APR reflects the annual cost of borrowing money.

    Financial Myths & Realities

    • Lottery Myth: gambling won't make you wealthy.
    • Credit Card Myth: approval for a credit card does not signify financial success.
    • "Upside-down" refers to owing more on an item than its market value.

    Student Debt & Financial Aid

    • Student loan debt exceeds $1 trillion in the U.S.
    • Average student loan repayment period is 10 years.
    • 66% of college graduates incur student loan debt during their studies.
    • FAFSA needs to be filed yearly to assess financial aid eligibility.
    • Scholarships and Grants are forms of financial aid that do not have to be repaid.

    Education Options & Opportunities

    • Community Colleges offer two-year degrees and are state-supported.
    • Trade Schools provide vocational training without general education requirements.
    • Work Study programs enable part-time jobs for college students.
    • Certifications can enhance job qualifications and can often be obtained at low or no cost.

    Financial Literacy & Future Planning

    • Cash flow principles emphasize living within financial means.
    • Choices made post-high school can impact financial situation for up to 40 years.
    • Comparison shopping is recommended when selecting a college to ensure value for money.

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    Description

    Test your knowledge of key concepts from Dave Ramsey's teachings in Chapters 4 and 5. This quiz includes important financial terms like FICO score and strategies for managing debt effectively. Prepare to enhance your understanding of personal finance fundamentals.

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