Credit and Debt Management Vocabulary

Flashcards for Credit and Debt Management

Installment Concept

A type of loan where a borrower receives a specific sum of money upfront and repays it over a predetermined period through regular, fixed payments. Each payment covers both a portion of the principal amount and the accrued interest.

Grace Period

A specified timeframe following a payment due date during which a borrower can make a payment without incurring late fees, penalties, or additional interest charges. It provides a cushion for unforeseen delays or financial constraints.

Billing Cycle

The recurring period between two consecutive billing statements, usually on a monthly basis. It encompasses all the financial activity and transactions relevant to the account during that time.

APR (Annual Percentage Rate)

The total annual cost of borrowing money, expressed as a percentage. It encompasses not only the interest rate but also any additional fees or charges associated with the loan or credit product, providing a comprehensive measure of the cost of credit.

Co-signer

An individual who agrees to assume the financial responsibility for a loan if the primary borrower fails to make payments as agreed. The co-signer's creditworthiness can help the borrower secure the loan, but they are equally liable for the debt.

Finance charges

Encompasses all fees and charges imposed by a lender for extending credit. These can include interest on loans or credit cards, as well as fees for various services such as bank transactions or cash advances. They essentially represent the price borrowers pay for the privilege of using borrowed funds.

Credit report

A detailed record of an individual's borrowing and repayment behavior, encompassing various credit accounts, loan types, and payment history. It serves as a comprehensive snapshot of a borrower's creditworthiness, influencing their ability to access credit in the future.

Credit limit

The maximum amount of money a lender permits a borrower to charge on a credit card or line of credit. It represents the upper limit of available credit for the borrower.

Credit score

A numerical value, typically ranging from 300 to 850, that assesses an individual's credit risk or the likelihood of timely bill payments. It is derived from information