PFIN Lesson 7 Review

Front

What is the primary difference between "credit" and "debt"?

Back

Credit is the ability to borrow money, while debt is the amount of money borrowed.

Front

Why might someone consider using credit to buy a home rather than renting?

Back

Credit allows you to buy a home even if you don't have any money saved.

Front

What is a potential risk of using credit cards if not managed properly?

Back

High-interest rates can lead to accumulated debt that is difficult to repay.

Front

Which of the following is a benefit of using credit responsibly?
Options:
It ensures that you will never face financial difficulties.
It allows you to avoid paying any interest on loans.
It helps you build a positive credit history over time.
It guarantees approval for all future credit applications.

Back

It helps you build a positive credit history over time.

Front

Why is building a credit history important?

Back

A good credit history makes it easier to obtain loans with favorable terms.

Front

What is a significant drawback of accumulating too much debt?

Back

It encourages overspending and living beyond your means.

Front

What is one risk associated with accumulating excessive debt?

Back

It can lead to financial stress and mental health issues.

Front

What is one risk associated with using credit cards for everyday purchases?

Back

It can lead to high-interest charges if the balance is not paid in full each month.

Front

How can using credit responsibly benefit an individual in an emergency?

Back

It provides a financial safety net when immediate funds are needed.

Front

What could be a consequence of missing credit card payments?

Back

It could negatively impact your credit score.