econ test end

how to find monthly % rate

Annual % rate(they will give you) % 12/months

How to find interest

Use your unpaid balance and multiply it by your monthly % rate

Resulting balance

Unpaid balance + interest

Same as Cash (with or without payment)

You get the item now and pay later with no interest as long as you pay within a set time.

No Payment

You don’t have to pay anything for a set period of time.

No Interest

You won’t be charged any interest during the promotional period.

No Payments, No Interest

You don’t pay anything AND interest doesn’t start until the promo period ends.

Secured Debt

A loan that is backed by something valuable (car, house).

If you don’t pay, the lender can take the item.

Unsecured Debt

A loan with NO item as collateral (credit cards, medical bills).

Lender can’t take property but can send to collections.

The 3 C’s of Credit

Character – Your reputation for paying bills on time.

Capacity – Your ability to repay (income vs. debt).

Capital – What you own (savings, assets) that shows stability.

Average Daily Balance

Credit card method: They add up your balance for each day, divide by the number of days, and charge interest based on that average.

Annual Percentage Rate (APR)

The yearly cost of borrowing money, including interest.

Truth in Lending Act (TILA)

A law that requires lenders to tell you the true cost of credit—APR, fees, and terms—so you aren’t tricked.

Mortgage

A long-term loan used to buy a house. The house is collateral.

Principal

The amount of money you originally borrow (not including interest).

Bankruptcy

A legal process where you cannot pay your debts, and the court helps erase or restructure what you owe.