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VIDEOS-U3 - CREDIT

Last updated 3 months ago

49 questions

A - LOAN BASICS

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B - CREDIT EXPLAINED

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C- THREE Cs OF CREDIT

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D - TYPES OF CREDIT

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E - SUPERIOR CHOICE-LIVING WITHOUT CREDIT CARD

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F - DAVE RAMSEY (credit cards)

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Question 1

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1. What is the main purpose of loans as described in the video?
a. To provide money for vacations
b. To help people afford things they can't pay for upfront
c. To increase debt levels
d. To encourage saving
2. Which type of loan is specifically mentioned for buying a vehicle?
a. Student loans
b. Mortgages
c. Auto loans
d. Payday loans
3. What does the term "principal" refer to in the context of loans?
a. The total interest paid
b. The amount borrowed
c. The time to pay back
d. The collateral
4. How are secured loans typically different from unsecured loans?
a. They have higher interest rates
b. They require no collateral
c. They usually have lower interest rates
d. They are always for small amounts
5. What factor can help lower your interest rate on a loan?
a. A poor credit score
b. A long-term relationship with the lender
c. Having multiple loans
d. None of the above
6. What role does a co-signer play in a loan agreement?
a. They receive the loan amount
b. They are responsible for repayment if the borrower defaults
c. They help negotiate the loan terms
d. They provide collateral
7. What is a fixed interest rate?
a. An interest rate that changes frequently
b. An interest rate that remains the same throughout the loan term
c. An interest rate that is lower than variable rates
d. An interest rate that applies only to secured loans
8. According to the video, what can influence interest rates?
a. The borrower's favorite color
b. The borrower's employment history
c. The type of loan only
d. How long the borrower has lived in their house
9. What is a significant drawback of payday loans mentioned in the video?
a. They have longer terms
b. They require collateral
c. They are considered the worst type of loan
d. They are always secured loans
10. How does a variable interest rate function?
a. It stays the same throughout the loan term
b. It changes based on a chosen index
c. It is set by the borrower
d. It is only applicable to auto loans

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(Timestamp 5:25mn) Here's the truth, _______ percent of finance is about behavior, while only _______ percent relies on knowledge.

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Question 49

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What percentage of Americans have not fully paid for their homes?

40%

60%

80%

90%

What is the average cost of a home mentioned in the video?

$200,000

$300,000

$400,000

$500,000

What is credit defined as in the video?

A gift from the bank

An immediate payment for goods

A measure of trust for future payments

A discount on purchases

What happens if you have a good credit score?

You will pay more for purchases

Lenders won't trust you

You will have better credit opportunities

Your reputation will suffer

What is the range of a credit score from the video?

100-500

300-850

500-1000

700-1200

What is the average credit score of an American mentioned in the video?

600

650

697

750

How can you start building good credit according to the video?

Spend over your limit

Buy unnecessary expensive items

Use a credit card for small purchases and pay bills on time

Ignore credit card statements

What is a credit card compared to according to the video?

A savings account

A long-term investment

A short-term loan

An insurance policy

What can happen if you don't keep up with credit card payments?

Your credit score improves

You earn more money

Your financial reputation worsens

You get more credit opportunities

When does the video suggest it's best to start thinking about credit?

After getting a big loan

When you have a stable job

Never

Early on in life

According to the video, what are the three main factors that lenders consider when deciding whether to lend money?

Income, expenses, and credit history

Capacity, character, and collateral

Interest rates, loan terms, and financial stability

Relationship, reliability, and risk

What does the video say about a borrower's "capacity" when applying for a loan?

It refers to the borrower's criminal history.

It is determined by the borrower's level of education.

It is based on the borrower's past loan repayment history.

It includes the borrower's sources and reliability of income.

Which of the following is NOT mentioned in the video as an element of a borrower's "character" that lenders consider?

The borrower's spending habits

How long the borrower has lived in the same place

The borrower's job and level of education

Whether the borrower has a criminal history

What is the purpose of collateral, as described in the video?

To provide a backup source of repayment for the lender

To determine the borrower's capacity to repay the loan

To ensure the borrower's reliability and honesty

To increase the interest rate on the loan

When a borrower buys a car using a loan, what is the relationship between the borrower and the lender regarding the car?

The borrower owns the car immediately.

The lender and borrower share equal ownership of the car.

The lender owns the car until the loan is fully repaid.

The car is considered separate from the loan agreement.

According to the video, what is the main purpose of the "three C's" that lenders consider when making a lending decision?

To assess the borrower's overall financial stability

To establish the interest rate and repayment terms

To determine the specific collateral required for the loan

To evaluate the borrower's risk profile and creditworthiness

How does the video differentiate between a "secured loan" and an "unsecured loan"?

Secured loans have a higher interest rate than unsecured loans.

Secured loans are only available to borrowers with good credit.

Secured loans require collateral, while unsecured loans do not.

Unsecured loans have a longer repayment period than secured loans.

How does the lender use collateral in the event of default?

As a way to assess the individual's character

As a means to recoup their money if the loan is not repaid

As a source of additional income for the lender

As a way to determine the individual's capacity to repay the loan

What is the main purpose of a lender evaluating an individual's capacity to repay a loan, according to the video?

To determine the individual's creditworthiness

To assess the individual's reliability and honesty

To identify assets the individual can use as collateral

To understand the individual's ability to make the required loan payments

Which of the following is NOT mentioned as something a lender would look at when assessing an individual's character?

The individual's current income level

Whether the individual has a criminal history

Whether the individual has lived in the same place for a long time

Whether the individual has borrowed in the past and paid back in full

What is the main difference between installment loans and revolving loans?

Installment loans have a predetermined length and end date, while revolving loans have a set maximum borrowing limit.

Installment loans always have lower interest rates than revolving loans.

Installment loans are designed to keep borrowers in debt for a longer period.

Installment loans are only used for mortgages and auto loans.

Which of the following is an example of an installment loan mentioned in the video?

Credit cards

Lines of credit

Personal loans

None of the above

What is the primary advantage of installment loans over revolving loans?

Installment loans have a fixed monthly payment.

Installment loans allow for prepayment without penalty.

Installment loans are always secured by physical assets.

Installment loans are more flexible in terms of repayment.

According to the video, what is the potential downside of installment loans?

They may have higher interest rates than revolving loans.

They may not allow for prepayment without penalty.

They may have a longer repayment period than revolving loans.

They may not be available for all types of purchases.

The video suggests that when borrowing money, the author prefers:

Revolving loans over installment loans.

Installment loans over revolving loans.

Avoiding non-mortgage debt altogether.

Either installment or revolving loans, depending on the situation.

What can borrowers see if they ask for it in relation to installment loans?

Credit score

Amortization schedule

Investment opportunities

Daily spending log

How does the interest rate on installment loans generally compare to that of credit cards?

Installment loans have higher interest rates

Installment loans have lower interest rates

Both have similar interest rates

Credit cards have no interest charges

What advice does the video offer for utilizing credit cards wisely?

Always maximize the credit limit

Pay off the balance in full every month

Only make minimum payments

Make large purchases irresponsibly

Which type of loan is associated with credit cards or lines of credit?

Installment loans

Revolving loans

Mortgage loans

Personal loans

What is a characteristic of revolving credit mentioned in the video?

The fixed monthly payment

The predetermined length of repayment

The changing monthly payment based on total balance

The high interest rates

What is the main reason the author suggests living without a credit card?

To avoid the temptation of impulse spending

To maintain a healthy credit score

To save money on credit card fees

To be financially independent

According to the video, what is the primary disadvantage of using a credit card compared to a debit card?

Credit cards have higher interest rates

Credit cards are not accepted everywhere

Credit cards make it easy to overspend

Credit cards have more fraud protection

Why does the author prefer using a debit card for online purchases?

Debit cards are more secure than credit cards

Debit cards do not require a credit score

Debit cards provide a sense of real-time spending

Debit cards have lower fees than credit cards

What is the author's main argument against using credit cards for emergencies?

Credit cards can be declined during emergencies

Credit cards do not provide immediate access to cash

Credit cards can exacerbate financial problems during emergencies

Credit cards have higher interest rates for emergency purchases

According to the video, what is a key advantage of using a debit card for travel?

Debit cards have lower foreign transaction fees

Debit cards are more widely accepted globally

Debit cards do not require a credit check

Debit cards do not lead to travel-related debt

What is the author's main argument against the idea that you need a credit card to build a good credit score?

You can buy a house without a credit score

Your credit score is not the only factor in your quality of life

You can live a fulfilling life without borrowing money

All of the above

What does the video suggest is a key benefit of having a robust emergency fund?

It provides peace of mind during unexpected challenges

It allows you to avoid using a credit card for emergencies

It ensures you have immediate access to cash when needed

All of the above

The passage states that it is possible to buy a house without having a credit score. What is the main reason given for this?

Credit scores are not required for home loans

Having savings in the bank is more important than a credit score

Credit scores can be established through rental history

Mortgage lenders use alternative underwriting criteria besides credit scores

The passage states that debit cards provide the same level of protection as credit cards if they are affiliated with a major credit company. What is the reason given for this?

Debit cards are insured by the FDIC

Debit cards have fraud protection from the credit card network

Banks offer the same level of protection for debit cards as credit cards

There is no difference in protection between debit and credit cards

How much does the national credit card debt currently stand at?

$896 million

$986 million

$986 billion

$896 billion

(Timestamp 5:40mn) Here are some practical steps to live a superior life without credit cards. Reorder these steps following the sequence mentioned by the speaker.

Cease the use of credit cards and avoid credit altogether.

Purchase within your means.

Build an emergency fund.

Assess your financial status.

Establish a budget.

Eliminate credit card debt.

Studies show that people spend more when there is an emotional disconnect from the fact that they are spending money.

True

False

Studying wealthy people and how they handle their payment structure is a good way to find out what works well financially.

True

False

Click all that apply. According to studies, which of these are true?

Using a credit card activates the pain centers in your brain

Spending cash activates the pain centers in your brain

Using a debit card activates the pain centers in your brain, but not as much as spending cash

Starting school at 7:00 AM activates the pain centers in your brain

According to the video, when people use credit cards they tend to:

Spend less money

Spend the same amount of money

Spend more money

Only spend money on necessary items

What does the video say about millionaires and their use of credit cards?

Millionaires always use credit cards

Millionaires never use credit cards

Millionaires only use credit cards to build credit

Millionaires don't have any kind of consumer debt

According to the video, what is the primary downside of credit card usage?

Accumulating wealth

Financial instability

Increased savings

High credit score