Consumer Finance Concepts

This set of flashcards covers vocabulary and definitions related to consumer finance concepts discussed in the lecture, focusing on loans, payments, amortization, and mortgages.

Consumer Finance

Financial services offered to individuals relating to personal loans, mortgages, and credit.

Monthly Payments

Regular payments made on loans or leases, typically occurring once a month.

Present Value

The current worth of a future sum of money given a specified rate of return.

Future Value

The value of an asset at a specified date in the future based on an assumed rate of growth.

Amortization Schedule

A table detailing each periodic payment on a loan, showing principal and interest portions.

Constant Payment

A fixed payment amount for each installment period in a loan repayment schedule.

Principal Payment

The portion of a payment that reduces the principal amount owed on a loan.

Interest Payment

The portion of a payment that goes towards the interest expense on a loan.

Effective Rate

The actual interest rate on a loan after accounting for compounding over a given period.

APR (Annual Percentage Rate)

The yearly interest rate charged for borrowing, expressed as a single percentage.

Loan Amount

The total amount of money borrowed from a lender.

Rate

The percentage of interest charged on a loan.

Number of Periods

The total number of payment periods for which the loan is issued.

Outstanding Principal

The amount of money still owed on a loan, excluding interest.

Mortgage

A loan used to purchase a home, secured by the value of the property.

Down Payment

An initial upfront portion of the total amount due, typically required in a mortgage.

Compounding Period

The frequency with which interest is applied to the outstanding balance of a loan.

Debt-to-Income Ratio

A measure of an individual's monthly debt payments in relation to their monthly gross income.