Chapter 12: Credit agreements

Question 1

Credit agreements

Answer 1

Agreement between consumer and lender forms basis of credit facility:
* Credit sum / limit
* Contract amount
* term
* repayment installment amount
* rules for early repayment
* default
* credit charges
* credit rates

Question 2

Credit sum / limit

Answer 2

Amount specified in agreement
Sum can be variable

Question 3

Contract amount

Answer 3

Specified in the agreement
total amount to be paid or total credit amount

Question 4

Term

Answer 4

specified period of commencement to expiry

Rarely longer than 72 months

Question 5

Repayment installment amount

Answer 5

Consumer pays credit back in installments (often monthly)
Credit repayment + charges
Fees can change over time

Question 6

Rules for early repayment

Answer 6

Consumer can pay earlier can result in a credit penalty fee since the creditor does not get all the agreed fees but results in an interest refund

Question 7

Default

Answer 7

Consumer fails to fulfil conditions in agreement (e.g. fails to repay)

Question 8

Credit charges

Answer 8

Consumer pays a fee to loan provider
Credit fee (interest) is in the agreement –> usually as a % per year but can be monthly

Question 9

Credit rates

Answer 9

% of the limit, or credit sum, or outstanding debt that consumer pays as a fee