Quiz 3.1 - 3.4 Flashcards
Credit
Purchasing something that you don’t pay for immediately
Creditor
An organization or person that extends credit to a consumer
Debtor
A person who uses credit
Assets
Everything you own (home, car, bank account, etc.)
Earning Power
Your ability to earn money now and in the future (want to have enough income to repay debt)
Credit Reporting Agency
Compiles records on all users of credit. Gives to creditors before debtors can use credit.
Credit Rating
Report card where creditor rates how well you met your financial obligations to a credit reporting agency
Fico Score
credit score ranging from 300-850, summarizing the probability that debtors will repay their debts. 850 is good
Installment Plan
Paying for merch or service over a period of time
Down Payment
Initial amount paid on an installment plan at time of purchase
Deferred Payment Plans
Payment over a period of time but interest is not charged if everything is paid on time
Layaway Plans
Customer doesn’t receive the product until it is fully paid for
Promissory Note
Document that must be signed that details the conditions of a loan. Signing it is promising to pay back your loan
Principal
The initial loan amount that you borrow is the principle
APR
Annual Percentage Rate - interest rate you pay per year
Cosigner
Person who will pay back the loan if the borrower can’t
Life Insurance
Covers the borrower’s loans in the event that the borrower dies
Prepayment Privilege
allows borrowers to pay before the due date to reduce interest
Prepayment Penalty
borrowers must pay a fee if they want to pay back the entire loan before the due date
Wage Assignment
Voluntary deduction from employees paycheck used to pay off loans
Wage Garnishment
involuntary form of wage assignment, usually ordered by the court
Balloon Payment
Last monthly loan on some payments can be much higher than the rest
Lending Institution
Organization that extends loans
Collateral
Customer who needs money leaves a small personal belonging while they are paying off the loan
Payday Loan
Loan taken for a short amount of time that borrower agrees to pay back once they receive their paycheck
Career Schools
Institutions that provide students with skills for specific jobs
Free Application for Federal Student Aid (FAFSA)
Will faciliate loans for students
Student Aid Report
Will indicate expected family contribution as well as other information about loans that you could take out
Federal Loan
Funded by the Federal Government
Private Loan
issued by a bank, credit union, school, or even state agency.
Federal Direct Subsidized Loan (Stafford)
Need based. Students can defer interest payments for a period of time. Students receive a six month grace period after school before they need to begin paying on the loan. Government pays the loans while the student is in school and during the six month period
Federal Direct Unsubsidized Loan
Non-Need based and interest on the loan is expected to be paid from the time it is taken out. No payment required while you’re in school or in the six months after graduation
Federal PLUS Loan (Parent Loan for Undergraduate Students)
allows parents (or grad students) to borrow money for college expenses
Federal Perkins Loan
loans for students with high financial need
Default
When a borrower fails to pay a loan on the schedule that was set for them
