financial literacy - unit 4

checking accounts

cash you hold onto like a debit or credit card

credit union

helps members manage their money effectively

banks

financial institution where customers deposit money, withdraw cash, and obtain loans

savings account

not spending your money; money stored for future references

emergency funds incase something happens

why do we need a savings account?

compound interest

helps with the savings account; deposit your money as early as possible

digital wallets

a software application that stores payment information on a smart device for convenient and secure online and in-person transactions

p2p spending

the practice of transferring funds digitally between 2 individuals

venmo, paypal, zelle, cashapp

what are some examples of p2p spending?

secured loan

type of loan in which a borrower pledges an asset they own as collateral to guarantee repayment

unsecured loan

a loan that does not require the borrower to pledge any assets, or collateral, as a guarantee of repayment

principal

the amount you initially borrowed

interest

extra money you pay as a result of borrowing money from a bank

term

the length of the loan (how long you have to pay the loan back)

amortization

the monthly payment stays the same, but some of the money goes to interest, and some of the money goes to the principal. it would end up being more principal, less interest

auto loan

a secured loan that you use to buy a vehicle

mortgages

a loan used to buy a home

adjustable-rate mortgage

a home loan with an interest rate that can change periodically after an initial fixed-rate period

predatory loan

practice of imposing unfair, deceptive, or abusive loan terms on a borrower

offer quick cash/instant approval, high interest rates for repayment, and additional fees

what are some features of predatory loans?

credit scores

your reliability as someone who borrows money; 3-digit number indicating your creditworthiness to lenders

850

what is the maximum number for a credit score?

secured credit card and co-signer for a line of credit

what are some ways to get a credit history?