Economics and Personal Finance Unit 7 Review

Closed-end installment loans

These are a type of loan where the borrower receives a lump sum of money from the lender and repays the loan in fixed installments over a set period of time. The borrower cannot access additional funds beyond the original loan amount, and once the loan is fully repaid, the account is closed.

Open-end credit

This is also known as revolving credit, is a type of loan where the borrower has access to a line of credit that can be used repeatedly as long as the borrower remains in good standing with the lender. With this, the borrower is not given a lump sum of money as with a closed-end loan, but instead, they are given a credit limit, which represents the maximum amount of money they can borrow.

Banks

These are financial institutions that provide a range of services related to money and finance, including holding deposits, making loans, managing investments, and providing financial advice. Banks accept deposits from individuals, businesses, and other organizations, and use those deposits to make loans and investments.

Credit unions

These are non-profit financial institutions that are owned and operated by their members, who are also their customers. They are established to provide affordable financial services, including savings, loans, and other financial products, to their members. Unlike banks, these are not-for-profit, and any profits they make are returned to their members in the form of lower interest rates on loans and higher interest rates on savings.

Online Lenders

These types of lenders are financial institutions that offer loans and other financial products exclusively over the internet, without the need for in-person interactions or visits to a physical branch.. They typically have more relaxed eligibility requirements and may offer loans to borrowers with less-than-perfect credit. They may charge higher interest rates than traditional lenders, but may also offer faster approval times and more flexible repayment terms.

Credit Cards

These are a common source of credit for consumers, offering a revolving line of credit that can be used for purchases and cash advances. They often come with rewards programs and other perks, but may also charge high interest rates and fees for late payments or cash advances.

Payday Loans

These are short-term loans that are typically offered to borrowers with low credit scores and limited income. They often have very high interest rates and fees, and can trap borrowers in a cycle of debt if not paid back on time. These are usually small, ranging from a few hundred dollars up to a few thousand dollars. In many cases, borrowers are required to provide a post-dated check or authorize an electronic debit from their bank account as collateral for the loan.

Pawnbrokers

these are individuals or businesses that offer loans to customers in exchange for collateral, usually in the form of personal property such as jewelry, electronics, or musical instruments. Customers can bring in items of value to a this entity and receive a loan based on the value of the collateral. This entity will hold onto the item until the loan is repaid, at which point the item is returned to the customer.

Peer-to-Peer (P2P) Lending

These platforms connect individual investors directly with borrowers. They may offer lower interest rates than traditional lenders, but may also have stricter eligibility require. This is a form of lending that allows individuals to borrow and lend money directly to each other, without the involvement of traditional financial institutions such as banks or credit unions.

Credit Score

This is a numerical rating assigned to an individual or business based on their credit history, which is used by lenders to assess creditworthiness and determine the likelihood of loan repayment. The score ranges from 300 to 850, with higher scores indicating better creditworthiness and lower credit risk. A higher number can help individuals and businesses obtain credit at favorable terms and rates, while a lower number can make it difficult to secure credit or result in higher interest rates and fees.

Credit bureaus

These are companies that collect and maintain information about individuals' credit history and credit scores. The three major credit bureaus in the United States are Equifax, Experian, and TransUnion.

Building credit

This refers to the process of establishing and maintaining a positive credit history over time. This can involve taking out loans, making regular payments on credit cards, and managing debt responsibly, which can help increase credit scores and improve access to credit in the future.

Repayment

This refers to the act of paying back a debt or loan over a period of time, typically according to the terms of an agreement between the borrower and the lender. This usually involves making regular payments over a specified period of time, which may include interest charges and fees.

Interest rates

These refer to the percentage charged by a lender to a borrower for the use of borrowed funds. Interest rates are determined by a variety of factors, including market conditions, inflation, and the creditworthiness of the borrower.

Default

This is a term used in finance to describe a failure to fulfill a financial obligation or debt. When a borrower is unable or unwilling to make payments on a loan or other financial obligation according to the agreed-upon terms, they are said to be in this.

Life insurance

This is a contract between an individual and an insurance company in which the insurer guarantees to pay a designated beneficiary a sum of money upon the death of the insured person. The purpose of this is to provide financial protection and support to the loved ones of the insured in the event of their untimely death.

Health insurance

This is a type of insurance policy that provides financial protection and coverage for medical expenses and healthcare services. These policies can cover a range of healthcare costs, including preventive care, hospitalization, prescription drugs, and medical procedures. The specific coverage and benefits of a health insurance policy can vary depending on the plan, the insurer, and other factors.

Disability insurance

This is a type of insurance policy that provides financial protection in the event that an individual becomes disabled and is unable to work. This insurance typically provides a percentage of the individual's income, which can help cover living expenses and medical costs during the period the person is out of work.

Long-Term Care insurance

This is a type of insurance policy that provides coverage for the cost of long-term care services for individuals who are unable to care for themselves due to age, illness, or disability. These types of services that are covered can include assistance with daily living activities, nursing care, and medical treatment, among others.

Estate planning

This refers to the process of making arrangements for the management and distribution of an individual's assets and estate in the event of their death or incapacity. This typically involves creating legal documents such as wills, trusts, and powers of attorney, which can help ensure that an individual's wishes are carried out and their assets are distributed according to their preferences

Buy and Hold Strategy

This strategy involves buying stocks or other assets and holding onto them for an extended period, typically several years or more. The goal is to benefit from the long-term growth of the asset, rather than trying to time the market or make short-term gains. The tax implications of this strategy depend on the type of asset being held.

Index fund investing

This is an investment strategy that involves buying and holding a diversified portfolio of securities that replicate a particular market index, such as the S&P 500 or the Dow Jones Industrial Average. This strategy aims to deliver returns that closely match the performance of the index they track, while minimizing expenses and other costs associated with active management.

Dividend Investing

This strategy involves investing in stocks that pay regular dividends. The goal is to generate a steady stream of income from these dividends, rather than relying solely on the appreciation of the stock price.

Value Investing

This involves looking for undervalued stocks or assets that have the potential to increase in value over time. This strategy can involve a more active approach to buying and selling assets.

Real Estate Investing

This involves buying and holding property with the goal of generating rental income or appreciation in value.

Cost of Living

This refers to the amount of money needed to sustain a certain standard of living, including basic necessities such as housing, food, transportation, healthcare, and other essential expenses. This can vary depending on factors such as location, inflation, market trends, and individual lifestyle choices. This is often used as a benchmark for determining salaries, benefits, and other forms of compensation.

Bankruptcy

This is a legal process that provides relief to individuals or organizations who are unable to pay their debts. This can involve the liquidation of assets to pay off debts (Chapter 7) or the reorganization of debts and repayment plans over a period of time (Chapter 13).

Philanthropy

This is the act of giving one's time, money, or resources to promote the well-being and quality of life of others, particularly those who are disadvantaged or in need. This involves voluntary action for the public good and is motivated by a desire to make a positive impact on society. It can take many forms, including charitable donations, volunteering, advocacy, and community service.

Volunteer services

These refer to the act of providing one's time, skills, and energy for the benefit of others, without expecting financial compensation. This can provide many benefits, such as personal fulfillment, skill development, social networking, and the opportunity to make a positive impact on the world.

Nonprofits

These play an important role in philanthropy, as they often receive donations and other forms of financial support from individuals, corporations, and other entities that wish to support their mission and programs. They can engage in a wide range of philanthropic activities, such as funding research, providing social services, promoting the arts, protecting the environment, and advocating for social justice.