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Overdraft protection is linked to your 1.checking account in case you overdraw your account. It draws on a line of credit that is usually established 2. for between $500 and $1,000 . You should use your overdraft provision 3 .only for emergencies . Frequent use of your overdraft provision can signal that youre 4. managing your cash wisely .

You receive funds from an unsecured personal line of credit 5. based on a regular disbursement schedule . Securing this type of line of credit 6. doesnt require going through the formality of setting up a new loan. It draws on a line of credit that can be 7. with no dollar limitation . Remember, even though acquiring the funds is as simple as writing a check, the funds still represent a loan. Payments are usually structured to be due 8. once a month .

Home equity lines of credit enable you to acquire cash based on the 9.equity in your home . The majority of lenders extend home equity lines of credit based on either 100% of your equity or some portion, usually 75% to 80% of your homes market value, whichever is 10. less . If you have an existing mortgage on your home, most lenders will 11. increase your maximum line of credit by the outstanding balance of that mortgage.

Today your home is worth $200,000. The balance you owe on your mortgage is $85,000. Your equity is $____. You 12. do not have to sell your home in order to gain access to your equity. According to your lending institutions policy, the maximum home equity line of credit is 80% of your homes worth. Eighty percent of your homes worth is $______. Your lending institution follows the practice of most lenders as described in the previous paragraph. Your line of credit will be $______. This line of credit is considered a loan that will be 13. secured with an additional mortgage on your house.

14. What do the three major forms of open (non-credit card) credit have in common? Check all that apply.

*They are helpful in emergencies.

*They provide funds that can easily be exhausted.

*They provide funds that are easy to spend unwisely. or

*They require collateral.

Knowing how revolving lines of credit work will help you to make informed decisions about using them. Answer the following questions about the various options available through revolving credit lines.

Using overdraft protection without getting into trouble with it requires 15. (the self-discipline to use it only in emergencies/ simply staying below your maximum limit). Remember that the funds used for the protection are 16. a (loan/your own money). As such, there are 17. (is/is not) a fee attached to using the funds. Ask yourself if the accumulating fees are really worth your overdrafts, for many of which you may have forgotten the original use.

Using an unsecured line of credit can help you 18. (make purchases sooner than you otherwise planned/draw on the equity in your home). Remember that a big danger is that once approved, obtaining cash advances is 19. (cumbersome/very simple). The debt created can 20. (be managed by using overdraft protection/quickly become overwhelming).

An advantage of using a home equity line of credit is 21. (it taps into the equity funds you may be depending on for your retirement). A big danger is that you 22. (may/may not) have the cash flow necessary to make the payments. You 23. (could/would never) lose your house.

Drop down from 1 - 23

1. checking account / debit card / student loan

2. for between $500 and$1,000 / without any dollars limitation

3. whenever it's convenient / only for emergencies

4. living beyond your means / managing your cash wisely

5. based on a regular disbursement schedule / when you decide to write a check for them

6. doesn't require / requires

7. with no dollar limitation / for $25,000 or more

8. when you have spare money / once a year / once a month

9. size of your home / equity in your home

10. less / more

11. increase / decrease

12. do not / do

13. secured with an additional mortgage on your house / unsecured

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