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Credit Basics
| Term | Definition |
|---|---|
| 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 |
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