Review questions chapter 7

How does a single-payment or balloon loan differ from an installment loan? What is a bridge loan?

Describe the differences between a secured and unsecured loan. How does Principle 8: Risk and Return Go Hand in Hand apply?

Describe a variable- or adjustable-rate loan. List four features that should be compared when shopping for this type of loan. What is a convertible loan?

Are the initial rates lower on a fixed-rate loan or a variable-rate loan? Why?

Credit contracts often include the acceleration clause, the deficiency payments clause, and the recourse clause to give the lender options for collecting the debt. Explain each clause. What is the purpose of the insurance agreement clause?

Home equity credit loans and credit lines are very popular sources of consumer credit. List the advantages and disadvantages of borrowing against home equity.

Student loan programs are available to students and parents to finance college- related expenses. Compare and contrast the programs available to students and parents. How are the interest rates determined?

8. Home equity, student, and auto loans are special-purpose consumer loans. Which ones offer the unique benefit of tax deductibility for interest paid?

9. What loan costs are included in the determination of finance charges? What is APR? How is it used?

10. What are payday loans? Besides the high interest rates, what are some of the dangers associated with this type of loan?

11. What methods are used to calculate interest on a single-payment loan? Which method is preferable to the consumer?

12. Why are loans based on the simple interest method a better option than loans using the add-on method? Is this true even if the consumer decides to repay the loan early?

13. Loan costs vary significantly with the lender. Identify at least two inexpensive loan sources, two more expensive loan sources, and two most expensive loan sources.

14. Based on Principle 8: Risk and Return Go Hand in Hand, name five ways you can reduce the risk for the lender thereby reducing the return for the lender and saving yourself money.

15. Why are mortgage payments not included in the debt limit ratio?

16. According to the debt resolution rule, what is the time frame for repayment of short-term debt? What types of borrowing are not considered in the debt resolution rule?

17. Remedies for overcoming excessive credit use can impact your present and future financial situation. Name eight remedies to consider when you are having

trouble paying your bills. List the advantages and disadvantages of each.

18. What is the fundamental difference between Chapter 7 and Chapter 13 bank- ruptcy? What three major criteria differentiate a filer's eligibility for each chapter?

What debts cannot be discharged in a Chapter 7 bankruptcy?