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Personal Finance Exam 2 Study Guide

Personal Finance Exam 2 Study Guide - APR relative cost of...

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APR : relative cost of credit on yearly basis expressed as percentage rate Average Daily Balance : sum of outstanding balances owed each day during the billing period divided by the number of days in the period Balance Transfer : payment on credit card by using a convenience check Cash Advance : a cash loan from a bank credit card account Consumer Credit : non-business debt used by consumers for expenditures not mortgages Consumer Statement : consumer’s version of disputed info in a credit report Convenience Check : used by bank credit cardholders to make cash advances Credit : goods, services, money received in exchange for a promise to pay at future date Credit Agreement (Note) : document outlines rules and fees associated with credit card Credit (Risk) Scoring : rate applicants on creditworthiness and likelihood of repayment Default : failure to make a payment of principal or interest when due Finance Charge : total dollar amount paid to use credit, includes all charges Interest : the price of credit, amount investor receives for allowing using lent money Grace Period : time in days b/w posting and transaction date where new purchases avoid Noninstallment Credit : single payment loans and open-ended credit Open-Ended (Revolving) Credit : credit is extended in advance of any transaction so the borrower doesn’t need to reapply each time credit is desired; amounts paid in one/series Periodic Rate : APR divided by number of billing periods per year (usually 12) Principal : an amount invested; amount owed on a debt Secured (Collateralized) Credit Card : backed by collateral savings account Service Credit : public utilities that do not require you to pay in advance Tiered Pricing : charge lower interest rates to best customers and higher rates to others Usury (Small Loan) Laws : establish max loan amounts, interest rates, and credit fees Acceleration Clause : after 1 late payment, all remaining installments are due at once Amortization : gradually paying off loan through series of periodic payments Bankruptcy : right to ask court to find them unable to meet debts Cash Loan : borrower receives cash and makes purchases/investments, pay off loans Chapter 13 : wage earner or regular income plan; bankruptcy for regular income Conditional Sales Contract : loan calls for title of property to transfer when payment made Continuous-Debt Method : determine debt limit if you can’t get out every 4 years Debt Limit : max people should owe based on ability to repay; debt equity>1 is insolvent Debt Payments To Disposable : deciding % of disposable personal income used to repay Deficiency Balance : money owed after collateral on defaulted loan is sold Discount Method : calculates interest; interest paid up front and subtracted from loan Garnishment : portion of debtor’s wages set aside to pay debts Installment (Closed-End) Credit : must repay amount owed in number of equal payments Lien : right to take and hold property or sell it for payment of claim Purchase Loan (Sales Credit) : installment loan where no cash transfers Sales Finance Company
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