Banking and Finance Principles Unit 5
Quiz yourself by thinking what should be in
each of the black spaces below before clicking
on it to display the answer.
Help!
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| Adjustable Rate Mortgage | Mortgage with changing interest rate
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| Asset-Based Lending | Loan secured with the assets of a business
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| Balloon Mortgage | A mortgage in which the entire remaining balance of the loan is due in one single payment
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| Commercial Lending | Loans to business enterprises
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| Consumer Reporting Agency | Company that compiles and sells credit records
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| Credit worthiness | A creditor’s measure of an individual’s or company’s ability to meet debt obligations
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| Debt Ratio | Total obligations compared to total income
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| Debt Service Coverage Ratio | Comparison of net operating income to the total cost of debt
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| Equal Credit Opportunity Act | Prohibits the use of race, color, religion, national origin, marital status, age, receipt of public assistance, or exercise of any consumer right against a lender as a factor in determining creditworthiness
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| Escrow | An amount paid in advance to the lender from which the lender pays real estate taxes
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| Factoring | A form of lending that advances cash in exchange for a business’s receivables
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| Fair Credit Reporting Act | Guarantees consumers the right to review and dispute information in the reports
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| Fair Debt Collection Practices Act | Protects consumers from unfair collection techniques
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| Fair, Isaac and Company, Inc. (FICO) Score | A three-digit number that credit granters can use in making a loan-approval decision
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| Fixed Rate Mortgage | Loans with a fixed interest rate for the life of the loan
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| Foreclosure | The court-ordered sale of a property when the mortgage is not paid
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| Grace Period | Period for which no interest charges accrue if balance is paid in full by due date
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| Installment Loan | Loan with fixed amount of payments, rate of interest, and length of term
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| Lien | A legal claim to the property to secure the debt
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| Line of Credit | An arrangement in which a bank or vendor extends a specified amount of unsecured credit to a specified borrower for a specified time period
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| Loan to Value | Amount of loan divided by the property value
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| Mortgage | A note, usually long term, secured by real property.
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| PITI | Housing costs that the lender considers in the loan analysis and that are itemized on the monthly mortgage statement
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| Point | A value equal to one percent of the loan
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| Redlining | A discriminatory act whereby banks refuse to lend to residents of certain neighborhoods
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| Reverse Mortgage | A consumer loan tied to the appreciated value of a property
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| Secured Loan | A loan in which some item of value backs the loan in case the borrower defaults on the loan
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| Shared Appreciation Mortgage | A form of consumer lending that may lower interest rates for borrowers who agree to share later with the lender some part of the amount the house appreciates
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| Short-Term Loan | Financing for a year or less
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| Small Business Administration | Agency that offers financial, technical, and management programs to help businesses
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| Subprime Loans | Rate that is higher than normal to offset the increased risk represented by a less-than perfect borrower
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| Term Loan | Financing for permanent working capital, equipment, and real estate
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| Truth in Lending | Guarantees that all information about costs of a loan is provided in writing
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| Underwriting | Reviewing a loan for soundness
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| Unsecured Loan | Loan backed by only the reputation and creditworthiness of the borrower
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