What’s a Subprime Mortgage?

It may or may not come as a surprise that a survey from the Center for Economic and Entrepreneurial Literacy (CEEL) found that the majority of Americans are unable to answer some of the most basic questions about borrowing, interest rates, financial terminology—and even math. The CEEL said in a release the survey “underscores the need for increased education on personal finance and economic issues.’

Some highlights from the survey include:

• 54% of respondents could not identify what a subprime mortgage was.
• 56% of respondents could not identify FICO score as the most important factor in getting a loan.
• 65% of respondents could not identify what would remain if you subtracted 25% from 8. One in three respondents could not identify what 1% of 50,000 was.
• 75% did not know that when in need of short-term emergency cash, bouncing a check costs more than wire transfers, credit card advances, and short-term payday loans.
• Half of respondents have overdrafted their checking account at one time, while a third of respondents have paid a bill late in the past year.
• 35% of respondents admitted to not having a family or personal budget that would allow them to conceivably eliminate their credit card debt by the end of 2009.

“It is clear that we need to increase personal finance education at all ages so we have better informed employees, borrowers, and voters,’ said James Bowers, managing director for CEEL, in the release.

The telephone survey was conducted by Opinion Research Corporation among 1,004 adults in private households in the U.S.

More information about CEEL is availalbe at www.econ4u.org.