Credit

Question 1

Credit

Answer 1

When goods, services, or money is received in exchange for a promise to pay a definite sum of money at a future date

Question 2

Creditor

Answer 2

The business or organization that extends the credit is the creditor

Question 3

Principal

Answer 3

Which is the original amount borrowed

the original amount of a debt on which interest is calculated

Question 4

Secured credit

Answer 4

credit for which the consumer must put up some kind of property as protection in the event a debt is not repaid.

Question 5

Collateral

Answer 5

a security pledged for the repayment of a loan

Question 6

Closed-end credit

Answer 6

A loan which the borrower must repay the amount in a specified number of equal payments.
A credit arrangement where the amount of money borrowed and the amount to be repaid per month are fixed at the time the installment loan is made

Question 7

Open-end credit

Answer 7

Extended as a line of credit established in advance so that the borrower does not have to apply for credit each time new credit is desired. Examples of this kind of credit include credit cards.
A credit arrangement where the amount of money borrowed continues to change as payments and purchases are made (i.e. credit card)

Question 8

installment

Answer 8

to pay for in regular, small amounts over time

Question 9

finance charge

Answer 9

A fee for borrowing money, added to a monthly credit card bill.

Question 10

credit history

Answer 10

a summary of a person’s borrowing and repayment history

Question 11

credit bureau

Answer 11

a private firm that maintains consumer credit data files and provides credit information to authorized users for a fee

Question 12

credit report

Answer 12

a detailed record of your personal credit and financial transactions

Question 13

credit rating

Answer 13

an evaluation of a consumer’s credit history

Question 14

credit score

Answer 14

a numerical rating given to individuals that represents their creditworthiness

Question 15

cosigner

Answer 15

A responsible person who signs a loan as a co-borrower and thereby agrees to pay the obligation if the primary borrower fails to do so

Question 16

APR

Answer 16

Annual Percentage Rate

Question 17

grace period

Answer 17

a time period during which no finance charges will be added to your account

Question 18

credit limit

Answer 18

the maximum amount of credit a lender will extend to a customer

Question 19

consumer finance companies

Answer 19

businesses that specialize in making small or personal loans

Question 20

loan sharks

Answer 20

unlicensed lenders who charge illegally high interest rates

Question 21

down payment

Answer 21

a partial payment made at the time of purchase

Question 22

balloon payment

Answer 22

A final loan payment that is much larger than the other installments

Question 23

acceleration clause

Answer 23

A provision in an installment loan contract that gives the seller the right to declare the whole balance due if the buyer misses even one installment payment

Question 24

add-on clause

Answer 24

A loan contract provision that allows purchases to be added to an existing installment loan, with earlier purchases used as security for later ones

Question 25

right of rescission

Answer 25

The right to cancel a loan within three business days

Question 26

delinquent

Answer 26

Past due

Question 27

default

Answer 27

act of failing to meet a financial obligation

Question 28

repossession

Answer 28

taking away property due to failure to make loan or credit payments

Question 29

collection agency

Answer 29

A business that collects unpaid debt for other companies or organizations

Question 30

lien

Answer 30

the right to take another’s property if an obligation is not discharged

Question 31

garnishment

Answer 31

Court-ordered procedure by which a portion of a delinquent debtor’s wages are paid to satisfy the debt

Question 32

credit counseling

Answer 32

a service to help consumers manage their debt load and credit more wisely

Question 33

debt consolidation loan

Answer 33

A loan that combines all existing debt into a new loan with a more manageable payment schedule

Question 34

bankruptcy

Answer 34

the legal proceeding by which a bankrupt person’s assets are distributed among those to whom he or she owes debts