what is credit Flashcards
what is credit
loan of money to purchase goods or services
what are creditors
lends money
what is interest rate
a fee on the loan
what are reasons for using credit
immediate purchase, deferred payment
what are advantages of using credit (3)
- emergencies
- convenience
- rewards
what are risks of using credit (5)
- high interest charges
- debt accumulation
- low credit rating (reduces chances of getting loans/insurance)
- inability to access credit
- impact on health (relationships, mental health, finances, work and school)
how to creditors determine borrowers eligibility
- finances: income, job security & debt load
- collateral (assets)
- financial info (financial history&habits)
- personal info (age, S.I.N, employers)
why does a creditor need to determine a borrowers eligibility
assess ability to repay
who might require a guarantor
first time renter or someone with no credit record may need a guarantor
what is a guarantor
someone who commits to paying the loan if borrower defaults
what is a credit contract
formal agreement to pay money back over time; each type has different rights & responsibilities
what are the 3 types of credit contracts
- variable credit contract
- loan agreement
- contract involving (instalment) credit
what’s a variable credit contract
limited amount of credit is made available to the consumer
what’s loan agreement
consumer receives a sum of money that he or she undertakes to repay according to the terms of the contract
what’s instalment sales contract
consumer does not become owner of the good until all payments have been made
what are 4 things to check before signing a contract
- personal information (name spelling, birthday,etc.)
- full cost of the loan (interest, fees)
- payment schedule
- penalties for default
what is a line of credit
pre-approved credit issued by a financial institution. The borrower uses it as needed
what are the most commonly used credit (2)
- credit card
- line of credit
what are Quebec student loans and bursaries for
assistance available for students with insufficient financial resources (for full-time vocational training, college, or university studies)
must school loans be paid back
yes
what do interest rates depend on
type of credit
what is excessive interest
above 60% (illegal)
what is the usual interest rate
4%-35%
