Unit 3: Credit

Grace Period

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