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Mortgage
A long-term loan for a home
Credit or the principle of the loan
This is the money the bank or other lender is willing to lend to a person.
Security
This is anything of value pledged by the borrower that the lender may sell or keep if the borrower does not repay the loan; something you have to promise to the bank if you donāt pay back your loan.
examples of security
house, car title, and stocks areā¦
Simple Interest Note
This is a document (or agreement) that states the terms and conditions of the loan.
cosigners
Bankers sometimes grant loans without security, but they require the signature of one or more other persons, called _________ who guarantee the loan will be repaid
Interest
The money the borrower pays to use the lenderās money.
Simple interest
This is based on the entire amount of the loan for the total period of the loan, a specific type of interest.
Time must be expressed in the same period as what?
Rate
Rate
The percentage of the loan that is paid in interest.
Bankerās Rule
Each month has 30 days and a year has 12 months and 360 days.
On the due date of a simple interest note the borrower must repay ā¦
Principle and Interest
Discount Note
Type of simple interest loan where the interest is paid at the time the borrower receives the loan
Bank Discount
The interest charged in advance when using a discount note
Partial Payment
A payment that is less than the full amount owed and made prior to the due date.
United States Rule
Interest accrued (built up) since the start of the loan or last partial payment must be paid before the payment can be used to lower the loan amount.
Annual compounding interest (# of compounds in one year isā¦)
1
Semiannual Compounding interest (# in one year isā¦)
2
Quarterly compounding interest (# in one year isā¦)
4
Monthly compounding interest (# in one year isā¦)
12
examples of fixed investiments
savings account, CDs (certificate of deposit), government bonds. Set interest rates.
examples of variable investments
Stocks, mutual funds, commercial bonds. Varying interest rates/returns
Compound Interest
This type of interest is computed based on the previous balance in the account, including previous interest.
Fixed Installment loan
Loan on which you pay a specific monthly payment amount for a set number of payments
Examples of Fixed Installment Loans
Mortgage, Auto, Student Loans
Open-end installmet loan
Loan on which there is no specific amount due each month, but a required minimum. Example: Credit Cards.
Credit Cards are what type of loan?
Open-End Installment Loan
Finance Charge
Total amount of money (interest) the borrower must pay the lending institution (such as a bank or MasterCard); Fancy way to say interest with installment loans
Total Installment price
Sum of amount borrowed AND down payment AND finance charge (points too if it is a mortgage)
3 parts to APR Table
APR, number of payments, Finance Charge per $100 of loan.
Actuarial Method
Used to find the amount of interest saved if you pay off an installment loan early (kinda the partial payment version of Fixed installment loans). Also used to find the total amount to pay the loan off
How to round minimum payments on credit cards:
Always round up!
Current Balance on a Credit Card
This balance is found by adding charges and subtracting payments from the starting/previous balance on a credit card.
Unpaid/Previous Balance Method
With this method, the current balance is used to determine the interest for a credit card.
Average Daily Balance Method (AVDB)
With this method, the balance used to determine interest on a credit card is found by averaging the balance on each day of the month. This is considered a fairer and more accurate way of calculating credit card interest.
Finance Charge on a credit card
Same thing as interest; can be calculated using either the unpaid/previous balance method, average daily balance method, or is calculated for a minimum payment in a different manner.
Minimum Payment Equation
Min payment = interest (i=prt) + ~1% of the principle
Grace Period
Window of time where you arenāt charged interest on your principle, given you had no previous balance
How to calculate finance charge on a credit card
i=prt. The p value changes depending on which of the three methods you are using.
Note 
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