Personal Finance Chapters 5-8

Deposit-Type Financial Institutions

Commercial Banks, Savings and Loan Associations, Savings Banks, Credit Unions

Nondeposit-Type Financial Institutions

Mutual Funds, Stockbrokerage Firms

Advantages to Online Banking

Personal financial management support, convenience, efficiency, effectiveness

Disadvantages of Online Banking

Start-up time, adapting to online banking, feeling comfortable, costumer service

Money Market Deposit Account (MMDA)

A bank account that provides a rate of interest that varies with the current market rate of interest

Certificates of Deposits (CDs)

Savings alternatives that pay a fixed rate of interest while keeping your funds on deposit for a set period of time that can range from 30 days to several years

Money Market Mutual Funds (MMMFs)

Mutual Funds that invest in short-term (generally with a maturity of less than 90 days) notes of very high denomination

Asset Management Accounts

Comprehensive financial services packages offered by a brokerage firm

U.S. Treasurey Bills

Short-term notes of debt issued by the federal government, with maturities ranging from 3 months to 12 months

Denomination

The face value or amount thats returned to the bondholder at maturity. Its also referred to as the bond's par value

U.S. Savings Bond

A type of security that's actually a loan on which you receive interest, generally every six months for the life of the bond. When the bond matures, or comes due, you get back your investment, or "loan". What you get back at maturity is usually the face v

Annual Percentage Yield (APY)

The simple annual percentage yield that converts interest rates compounded for different periods into comparable annual rates. Allows you to easily compare interest rates.

Federal Deposit Insurance Corporation (FDIC)

The federal agency that insures accounts at credit unions

National Credit Union Association

The federal agency that insures accounts at credit unions.

Overdraft Protection

Provision of an automatic loan to your checking account whenever sufficient funds are not available to cover checks that have been written against the account.

Grace Period

The length of time given to make a payment before interest is charged against the outstanding balance on a credit card

Credit Card Fees

Annual, Merchant's Discount, Cash Advance, Late, Over-the-limit

Different kinds of Credit Cards

Bank, Premium or Prestige Credit Card, Affinity, Travel and Entertainment, Single-Purpose

The Five C's of Credit

Character, Capital, Collateral, Capacity and Conditions

FICO

Fair Isaac Corporation

Whats a good credit score?

The national median is 723, but the cutoff to get the best rate generally requires a score of 760 or higher, with a score of 620 often times serving as a cutoff point for recieving credit from many lenders.

Whats in a credit report?

Identifying Information, Trade Lines or Credit Accounts, Inquires, Public Record and Collection Items

The Factors that determine you credit score

Your payment history (35%), The amount you owe and your available credit (30%), Length of credit history (15%), Types of Credit Used (10%), New Credit (10%)

Three major Credit Bureaus

Experian, Equifax, and TransUnion

Debt Percentage Rules

Mortgage Debt cannot exceed 28% of income, while total debt cannot exceed 36% of income

Single-Payment or Balloon Loan

A loan that is paid back in a single lump-sum payment at maturity, or the due date of the loan, which is usually specified in the loan contract. At the date you pay back the amount you borrowed plus all interest charges

Bridge or Interim Loan

A short-term loan that provides funding until a longer-term source can be secured or until additional financing is found

Installment Loan

A loan that calls for repayment of both the interest and the principal at regular intervals, with the payment levels set in such a way that the loan expires at a preset date

Loan Amortization

The repayment of a loan using equal monthly payments that cover a portion of the principal and the interest on the declining balance. The amount of the monthly payment going toward interest payment starts off large and steadily declines, while the amount

Fixed Interest Rate Loan

A loan with an interest rate that stays fixed for the entire duration of the loan

Variable or Adjustable Interest Rate Loan

A loan in which the interest rate does not stay fixed but varies based on the market interest rate

Prime Rate

The interest rate banks charge to their most creditworthy, or "prime", costumers

Convertible Loan

A variable-rate loan that can be converted into a fixed rate loan at the borrower's option at specified dates in the future.

Security Agreement

An agreement that identifies whether the lender or borrower retains control over the item being purchased

Default

The failure of a borrower to make a scheduled interest or principal payment

Note

The formal document that outlines the legal obligations of both the lender and the borrower

Student Loan

A loan with low, federally subsidized interest rates given to students based on financial needs

Ways to get a lower interest rate

Secured, higher credit score, lower maturity, money down

Earnest Payment

A deposit on the home purchase to assure the seller that the buyer is serious about buying the house

Tips when buying a car

Get the service records, one owner and know the owner