Personal Finance, Credit, Loans, and Insurance Vocabulary

Vocabulary flashcards covering key concepts from personal finance notes, including credit metrics, credit scores, borrowing terms, housing/renting, and insurance definitions.

3 C's of Credit

Character, Capital, and Capacity.

Character (in Credit)

Your history of being trustworthy with payments and debt.

Capital (in Credit)

Your income, assets, and net worth that could help support repayment.

Capacity (in Credit)

Your ability to repay based on your income compared with debts and expenses.

Balance Payer

Someone who pays their credit-card balance in full each month.

AnnualCreditReport.com

The official website where you can obtain your free annual credit reports.

Credit Card

A card using borrowed money from the card issuer.

Debit Card

A card using your money, taken directly from your bank account.

APR

Annual Percentage Rate; the annualized cost/rate associated with borrowing money (the rate you pay).

APY

Annual Percentage Yield; the annual return earned on savings/investments, including compounding (the yield you earn).

Principal

The original amount of money borrowed.

Interest

The cost of borrowing money.

Mortgage

A loan used to purchase a home, repaid through regular payments of principal and interest.

Down Payment

Money you pay upfront toward a purchase instead of borrowing it.

PMI

Private Mortgage Insurance; insurance that protects the lender and is commonly required when the borrower has a relatively small down payment.

Home Equity

The portion/value of the home that you actually own.

Underwriting

The process a lender uses to evaluate a borrower's risk and decide whether/how to approve a loan.

Subprime Borrower/Loan

A borrower considered higher-risk, or a loan made to a higher-risk borrower, often at a higher interest rate.

Security Deposit

Money paid upfront to a landlord that can cover unpaid bills or damage.

Lease

A legally binding contract describing the terms of renting a property.

Premium

The amount you pay for insurance coverage.

Deductible

The amount you generally pay out of pocket before insurance begins paying covered costs, subject to the policy.

Liability Coverage

Car insurance coverage that pays for certain injuries or property damage you cause to other people when you're legally responsible (them).

Collision Coverage

Car insurance coverage that pays for damage to your vehicle from a collision, subject to policy terms (your car crashes).

Comprehensive Coverage

Car insurance coverage that pays for certain non-collision damage, such as theft, vandalism, weather, or falling objects (other covered damage to your car).

Renters Insurance

Insurance that generally protects your belongings and certain liability risks, as the landlord's insurance doesn't normally insure your personal possessions.

Homeowners Insurance

Insurance that generally protects the home, belongings, and certain liability risks, depending on the policy.

Health Insurance

Insurance that helps cover eligible medical expenses.