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