Loans (chapter 8)

Question 1

single-payment loan

Answer 1

loan that is repaid in one payment with interest

Question 2

principal

Answer 2

initial amount of a deposit or loan

Question 3

term

Answer 3

length of time money will be borrowed

Question 4

promissory note

Answer 4

written promise or contact to pay back a loan

Question 5

collateral

Answer 5

any asset that is pledged as security for a loan

Question 6

lien

Answer 6

legal agreement giving the lender the right to claim assets of a borrower if it is necessary to repay the loan

Question 7

ordinary interest method

Answer 7

method for collecting interest that assumes each month has 30 days, for a total of 360 days in a year

Question 8

exact interest method

Answer 8

method by which interest is calculated that uses the exact length of the term divided by 365 to get an exact fraction of the year

Question 9

installment loan

Answer 9

loan for which payments are made for at predetermined intervals

Question 10

amortization table

Answer 10

scheduled that shows the amount of interest and principal for each payment so a loan can be repaid within a specific period of time

Question 11

down payment

Answer 11

amount a borrower pays up front

Question 12

amount financed

Answer 12

cost that will be covered by a loan after a down payment is made

Question 13

early repayment

Answer 13

borrower pays off the installment loan sooner than the original term

Question 14

level payment plan

Answer 14

repayment plan designed to have the same payment amount in each installment

Question 15

payday loan

Answer 15

short-term loan designed to be repaid when the borrower gets his or her next paycheck

Question 16

title

Answer 16

document that legally establishes ownership of property, such an automobile or house

Question 17

title loan

Answer 17

loan in which the lender takes possession of the title of a persons car as collateral until short-term loan is repaid

Question 18

pawnshop

Answer 18

business that offers loan requiring personal property as collateral

Question 19

foreclosure

Answer 19

when the ownership of a house is transferred to the lender

Question 20

bankrupt

Answer 20

when a person or entity is unable to pay debts as the payments are due

Question 21

bankruptcy

Answer 21

court order that excuses the debtor from having to repay some or all his or her debts

Question 22

FAFSA (free application for federal student aid)

Answer 22

form issued by the federal government that is used by postsecondary schools to determine a students need for financial aid

Question 23

grant

Answer 23

funding that does not have to be repaid

Question 24

scholarship

Answer 24

amount of money awarded to a student that must be towards payment for college

Question 25

merit-base scholarship

Answer 25

scholarship that a student earns based on ability or performance

Question 26

529 plan

Answer 26

saving plan for college that requires that payments be mas over time for use in the distant future