4 UNITS 4 REVIEW

Credit

• money made available by a lender (creditor) to a borrower, with the understanding it will be paid back, usually with interest

Interest

the price/fee that one pays for the right to borrow another party’s money

Installment

regular or ’monthly’ payment

Non-installment Credit

will NOT have installments, because it will be paid off completely in the short-term (usually w/in 30 days). The simplest form of consumer credit.

Installment Credit

used for large specific purchases that will be paid back over time with installments (generally monthly)

Principal

Amount borrowed before interest is calculated

Revolving Open-End Credit

Type of credit that permits a consumer to borrow up to a pre-determined maximum amount

Credit Limit

• maximum amt. permitted to be borrowed

Credit History

Record of credit use and payments.

Equal Credit Opportunity Act

Prohibits creditors from denying credit based on gender, age, race, national origin, religion, or marital status.

Creditors

a person or company to whom money is owed

Credit Bureaus

organizations that collect credit information about consumers (Equifax, Experian, Trans Union)

Credit Report

document including one’s credit history, requested by a lender prior to offering credit (Will include → credit score, payment history, bankruptcy, etc.)

Fair Credit Reporting Act

a federal law that limits the sharing of an individual’s financial information to firms that have a legal purpose to evaluate it.

Credit Score

numeric value representing a person’s credit worthiness

Fair Isaac Corporation (FICO)

created a model on which credit scores (FICO scores) are calculated. 300-850 (Higher # = better credit history, lower risk, lower interest rates, most people → 600-800)

Identity Theft

when someone uses your personal information for their gain w/o your permission

Shoulder surfing

• looking over one’s shoulder

Skimming

copying down one’s personal info.

Pretexting

posing as someone else

Phishing

pretexting online

Pharming

Identity theft technique that uses e-mail viruses to redirect someone from a legitimate Web site to an official looking Web site designed to obtain personal information.

Minimum wage

the lowest wage permitted by law

Living wage

a wage that is high enough to maintain a ‘normal’ standard of living

Gig economy

a labor market characterized by the prevalence of short-term contracts or freelance work as opposed to permanent jobs.

Cryptocurrency

digital asset/monetary unit created using cryptographic (code solving) techniques that enable people to buy, sell or trade them securely

Economic system

• way in which a government/society is organized for accessing goods and services
  

Capitalism/Market Economy

• an economic system where people and businesses independently decide what goods and services to produce and keep most profits, aside from taxes.
  
  

Supply

• the amount of goods and services that are available (generally → the lower the supply, the higher the price)
  
  
  

Demand

• the desire that the market has for goods and services (generally → the higher the demand, the greater the price)

Socialism

• an economic system which advocates that the production of goods & services should be owned and/or regulated by the ‘community as a whole’

Communism

• an economic system that features the public ownership of all property and means of production, with each person working ‘according to their ability’ and paid ‘according to their needs’

Personal Loan

a type of credit initiated at the time of purchase for one specific asset

Down Payment

portion of the purchase price that is paid for at the time of purchase by the borrower (sometimes mandatory, homes → could be 20%)

Terms of a Loan

characteristics for repayment of loan, including: Principal, Interest rate, and Loan time length

Finance

to pay for a portion of a major expense by taking out a loan: synonym for credit/borrow/loan)

Cosigner

signs loan contract, along w/borrower, agreeing to repay the loan if the borrower fails to do so

Maturity Date

date when loan is completely paid off

Annual Percentage Rate (APR)

overall interest rate, taking interest ‘gimmicks’ into account

Secured Loan

a loan that has an asset pledged against its repayment

Collateral

name for an asset pledged against the repayment of a loan

Default

to stop making payments on a loan

Fixed-Rate Mortgage

interest rate/payments remain the same

Adjustable Rate Mortgage (ARM)

interest rate may adjust, pre-set intervals (1, 3, 5 years), so payments may go up/down

Teaser Rate

low initial interest rate, to encourage borrower

Subprime Mortgage

offered to people with poor credit scores, high interest rates

Home Equity Loan

a personal loan that can be taken out, once a homeowner has accumulated equity in their home (The Math: home value – liability = equity)

Line of Credit

an agreement to allow borrowing as needed up to a certain amount of money.

Homeowner’s Insurance

insurance policy that protects a homeowner from financial losses due to natural disaster, fire, theft, injury, etc.

Renters insurance

insurance policy that protects a renter from financial losses

Policy Riders

additional items that can be added on to a policy (jewelry, art work, etc.), for an increase in premium price

Direct Subsidized Loans

available to undergraduate students who document financial need

Direct Unsubsidized Loans

available to all undergraduate students

Direct Plus Loans

available to graduate students and parents of dependent undergraduate students

Lease

long-term rental agreement

Liability Coverage

insurance coverage for damage caused to other  people’s well-being/their property

Credit Cards

provides individuals with revolving open-end credit, which they can draw from repeatedly up to some pre-set limit.

Credit Provider

an entity, such as a bank, that agrees to make a certain amount of credit available to a cardholder.

Credit Check

performed by potential creditors to access a person’s credit report to examine the individual’s credit history and the ability to repay.

Overdraft Protection

a feature that allows a person to “overdraw,” or exceed the credit limit. (Overdraft protection is also a feature of checking accounts, where it protects someone in the event that a check is written for more money than is in the account.)

Annual Fee

charged by credit card companies for the privilege of using their card.

Grace Period

time in which credit card companies do not charge interest on purchases. Typical grace periods are 20 days from the time the statement is “closed,” or the bill is calculated and sent.

Cash Advances

the ability to use a credit card to withdraw cash from a bank or ATM (rather than just purchasing a good or a service).

Interest Rates

is the cost of borrowing money or the reward for saving it. It's a percentage of the principal amount that you either pay to a lender when you borrow or receive from a bank when you save.

Debt Consolidation

Combining several small accounts into one larger account that may be able to be financed at a lower rate.

Bankruptcy

a legal process in which a court takes over some of the finances of a person who is unable to pay his or her bills.

Payday Lending

a lender provides cash advances at a high cost to customers who provide a check dated for some time in the future.

Pawnbroker

holds items in exchange for loans that run for 30 days to as much as three months.