Unit 3: Credit

Grace Period  

A period of time, usually twenty to thirty days, when interest is not charged on current credit card purchases. 

Universal Default  

A provision in some credit card contracts that allows the company to review its customers' credit reports and charge a higher default interest rate if a customer's credit score goes down for any reason 

Bankruptcy 

A legal process in which a person or business declares the inability to repay debts

Credit Fraud   

The theft and illegal use of someone else's credit information 

Identity Theft  

The act of gathering enough information about a person to assume his or her identity, and then using that identity to commit fraud or other crimes 

Installment Credit 

A loan repaid with interest in equal amounts over a set period of time

Credit Cards  

**Plastic cards issued by banks, retail stores, and other businesses that allow the user to buy products or services on credit, with an interest charge if the balance is not paid in full by the due date** 

Annual Percentage Rate (APR) 

The amount of interest expressed as a yearly rate 

Revolving Account  

A charge account that has a credit limit but does not have to be paid in full before the borrower can make further purchases  

Secured Loans  

Loans that are backed up by collateral combining two or more existing loans into a single new loan, usually to reduce monthly payments or obtain a lower interest rate. 

Line of Credit  

An approval loan amount that can be used at the borrower's discretion  

Loan Consolidation  

Combining existing loans into a single new loan  

Loan Sharks  

People who loan money illegally and set very high interest rates  

Principal 

The amount of money originally borrowed or still owed, on which interest is charged; also the amount of money deposited or invested, on which interest is credited. 

Appraisal 

A professional estimate of the market value of a property 

Finance Charges  

The costs of using credit, including interest, late charges, and other fees  

Origination Fee 

A fee for starting paperwork on a loan  

Assets

Money or anything else of value that a person or an organization owns 

Liabilities

Money or other debts that a person or an organization owes  

Net Worth 

The difference in value between total assets and total liabilities

Credit Bureau 

An agency that collects and sells personal credit information about individuals  

Money Order  

A financial instrument, purchased at a bank or post office, that orders a specified amount of money to be paid to a specified person or organization  

Credit Counsellors

Individuals who are trained to give advice on handling money and getting out of debt  

Debt Management Plan (DMP) 

A plan for paying off debt, in which the consumer deposits money each month with the credit counselling service, and the service uses the money to pay the debts 

Garnishment 

A court order allowing all or parts of a person's wages to be paid directly to the person's creditors