Debt Flashcards
(15 cards)
The original amount borrowed
Principal
The cost of borrowing money; the additional amount to the principal you must pay
Interest
A “schedule” or breakdown of how much of each loan payment goes toward principal and how much toward interest
Amortization
An amount of money you “put down”, or give the bank, towards the cost of the item you are borrowing. Reduces the amount you have to borrow.
Down Payment
An item of value the lender can take ownership of to repay your loan if you default. (example: the car is the collateral in a car loan)
Collateral
A additional person who agrees to be responsible for paying the debt. Helpful when your credit is low or non-existent
Co-signer
A legal, but last resort, method of eliminating most of your debt
Bankruptcy
How long can a bankruptcy stay on your credit report?
10 Years
Some consequences of a poor credit score
1) Higher interest on loans
2) Harder to get credit in the future
3) Higher security deposits on rent and utilities
4) Being turned down for renting an apartment
Predatory loans designed to be short term and automatically repaid with your next paycheck
Payday Lenders
A loan specifically for buying a home.
Mortgage
What two things do you pay for in a mortgage payment?
Principal & Interest
(You also pay taxes & insurance but that is in addition to the mortgage)
Characteristics of owning a home
More stable
Must pay property tax and homeowner’s insurance
Pay for your own major repairs
Investment grows over time
Characteristics of renting a home
More flexible
Renew contract annually (price goes up)
Landlord pays for major repairs
May choose to invest in stock market instead of home ownership
What is the 3 part definition of identity theft?
1) Using someone else’s information
2) Without their permission
3) For your personal gain
