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Credit Basics

TermDefinition
Credit is... with the promise to pay back the determined amount of money in the future.
Individuals must pay back... in separate payments
Credit availability is based on... trust
What are three credit sources? Private mortgage companies Automobile dealership Depository Institutions Government
How are you spending future income when using credit? Because you don't have the money at the moment
What can happen if credit is not managed responsibly? Create financial stress and negatively impact quality of life
What are three benefits to using money saved instead of credit? No interest No contract Not spending future income
What is a disadvantage of using money saved instead of credit? Credit cards have more security
Why is reading a contract carefully important and what a person should consider? You need to know how and when you need to pay back
What is the recommended amount you should borrow? Less than 20% of annual net income Monthly-Less than 10% of monthly net income
Closed-end credit Extended line of credit established in advance
Open-end credit Loan which the borrower must repay the amount in a specified number of equal payments
Payday loan short term loan that provides immediate cash by securing a borrower's written check
Rent-to-own Borrower leases tangible items with the condition that the item will be owned by the renter if the borrower does not fulfill his/her contract
Title loan Gives the lender their automobile or personal property in exchange for cash
Pawn loan (2) Gives the leder their automobile or personal property in exchange for cash
Refund anticipation loan Lender gives borrower a loan based upon their anticipated tax fund
Credit application A form requesting information about a credit applicant
Credit limit a limit on a credit card that cannot be exceeded
Minimum payment 3-3.5% of your total bill
APR Annual Percentage Rate
Debit card a plastic card that is electronically connected to a bank account
Late payment fee a fee when you have to many late payments
Over-the limit fee a fee when you go over your credit limit too many times
Penalty APR A higher interest on your APR
Created by: 521284