Unit 4 Debt Review (Money Matters)

Match the following

• Credit card

• A yearly fee that is charged by the credit card company for the convenience of the credit card

• Annual fee

• Cost of borrowing money on an annual basis; takes into account the interest rate and other related fees on a loan

• Loan Term

• Time frame that a loan agreement is in force, and before or at the end of which the loan should either be repaid or renegotiated for another term

• Tax deduction

• Type of card issued by a bank that allows users to finance a purchase

• Annual percentage rate (APR)

• An expense, such as a charitable contribution, that can be deducted from one's taxable income

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Match the following

• Credit report

• A measure of an individual's credit risk; calculated from a credit report using a standardized formula

• Debt snowball

• A decrease or loss in value

• Depreciation

• Preferred method of debt repayment; includes a list of all debts organized from smallest to largest balance; minimum payments are made to all debts except for the smallest, which is attacked with the largest possible payments

• Introductory rate

• A detailed report of an individual's credit history

• Credit score

• An interest rate charged to a customer during the early stages of a loan; the rate often goes up after a specified period of time

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Match the following

• • Credit

• • A debt evidenced by a "note," which specifies the principal amount, interest rate, and date of repayment

• • Interest

• • A person or organization that uses a product or service

• • Loan

• • An obligation of repayment owed by one party (the debtor/borrower) to a second party (the creditor/lender); in most cases this includes repayment of the original loan amount plus interest

• • Consumer

• • A fee paid by a borrower to the lender for the use of borrowed money; typically interest is calculated as a percentage of the principal (original loan amount)

• • Debt

• • The granting of a loan and the creation of debt; any form of deferred payment

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If you do not have a FICO score, what factors will determine whether or not you qualify for a mortgage?​ (a)   ​ (b)  

• History of rental payments
• History or utility payments
• Spending history
• Credit History

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Determine if each statement is a Myth or Fact

Groups:

(a) Myth

,

(b) Fact

• Borrowing money can have serious consequences and prevent you from building wealth.

• The borrower is slave to the lender.

• You have ʺarrivedʺ financially once you get approved for a credit card.

• Debt is a tool and should be used to create prosperity.

• The lottery and other forms of gambling will make you rich.

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Which of the following is not a recommended step in the Drive Free method of purchasing a car?

• Plan your purchase in advance using the sinking fund method of saving.

• Explore new car dealerships for the best interest rate.

• Start with an inexpensive car and gradually move up in car value as your savings increases.

• Place your savings in a mutual fund so that your money can make more money.

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Reorder the following using the debt snowball method starting with the debt you should pay off first.

• Car loan,

  minimum payment = $342, total owed = $21650, interest rate = 8.15%

• Discover card,

  minimum payment = $35, total owed = $645, interest rate = 9.99%

• Visa card,

  minimum payment = $62, total owed = $1750, interest rate = 14.99%

• Personal loan from family,

  minimum payment = $25, total owed = $2000, interest rate = 4.25%

• Mortgage,

  minimum payment = $1350, total owed = $115,620, interest rate = 4.82%

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