Vocabulary Quiz I

Question 1

Credit

Answer 1

When something is bought that is not paid for at the time of purchase

Question 2

Debtor

Answer 2

Organization or person who uses credit

Question 3

Creditor

Answer 3

Organization or person who extends credit to debtors

Question 4

Asset

Answer 4

A person property Or what is owned

Question 5

Earning power

Answer 5

A person’s ability to earn money now and in the future

Question 6

Credit rating

Answer 6

A numerical value that indicates how well a user of credit meets financial obligations; these records are used by creditors when they decide to issue credit

Question 7

Credit reporting agency

Answer 7

Organizations that compile records on users of credit as to how well they repay their debts

Question 8

FICO score

Answer 8

A score that summarizes the probability that a debtor will pay a debt and is a reliable was that creditors judge creditworthiness

Question 9

Installment plan

Answer 9

A method of payment of a purchase or services over a period of time

Question 10

Down payment

Answer 10

The upfront money applied to a purchase that is made using a ban (credit)

Question 11

Lending institution

Answer 11

Organizations that extend loans, making their profits by charging interest; includes banks, savings and loans, credit unions, consumer finance companies, life insurance companies and pawnshops

Question 12

Collateral

Answer 12

Security, as personal belonging, a car or boat title, cd, or stock certificates, that insures a loan will be repaid

Question 13

Payday loan

Answer 13

A small loan taken over a very short period of time, usually a few weeks or less, requiring the borrower to pay back the loan in full on an upcoming payday mutually agreed upon by the borrower and lender

Question 14

Deferred payment plan

Answer 14

Requires the borrower to make periodic payments but no interest is charged if the payments an made on time. Borrowers pay the same price for an item as if they paid for it in full at the time of purchase and they take possession of the item immediately

Question 15

Layaway plan

Answer 15

A method for purchasing merchandise whereas the customer makes periodic payments, usually monthly, towards the purchase price of merchandise. The merchandise is held at the star (sometimes for a fee) until all payments are made

Question 16

Default

Answer 16

Describes the situation when borrower fails to make payments according to the schedule set up when the loan originated

Question 17

Promissory note

Answer 17

An agreement that states the conditions of a loan ; a borrower’s signature confirms a promise to pay back the loan as outlined in an agreement

Question 18

Cosigner

Answer 18

A person that signs a promissory note along with the borrower and agrees to pay back the loan if the borrower does not

Question 19

Life insurance

Answer 19

A type of insurance that pays a specified amount upon the policy holder’s death; a creditor often requires a borrower to take out [this] to cover the loan in the event the borrower dies before the loan is paid

Question 20

Prepayment privilege

Answer 20

An agreement that allows a borrower to make payments before the due date to reduce the amount of interest

Question 21

Prepayment penalty

Answer 21

An amount borrowers sometimes must pay in they wish to pay back an entire loan before the due date

Question 22

Wage assignment

Answer 22

A voluntary deduction from an employees paychecks, used to pay off debts

Question 23

Wage garnishment

Answer 23

An involuntary form of was assignment, often done by court order

Question 24

Balloon payment

Answer 24

The last monthly payment on some loans that is much greate than the previous payments

Question 25

Principal

Answer 25

The money borrowed from the bank (or, in some cases, the money in a savings or checking account)

Question 26

Annual percentage rate

Answer 26

Is the cost you pay each year to borrow money, including fees,expressed as a percentage