| A | B |
|---|
| APR or “Rate” | Annual Percentage Rate; yearly cost of interest that is charged for using credit |
| Acceleration clause | Installment loan provision that gives the seller the right to declare the whole balance due if the buyer misses even one installment payment |
| Add-on clause | Loan contract provision that allows purchases to be added to an existing installment loan, with earlier purchases used as security for later ones |
| Annual fee | Yearly fee charged to a customer to participate in credit program |
| Asset | Item of value owned; Ex: money, auto, home, jewelry |
| Bankruptcy | Legal relief from repaying certain debts |
| Balloon payment | Final loan payment that is much larger than the other installments |
| Capacity | Borrower’s ability repay debt from regular income |
| Capital | Borrower’s financial resources |
| Cash credit | Used to borrow money; often used to purchase goods and services from sellers who do not give credit. Types of cash credit include installment loans, single-payment loans, and credit card or check credit limits. Ex: Food Lion does not extend credit, but accepts credit cards |
| Character | Borrower’s reputation for honesty and financial history |
| Closed-end credit | One-time extension of credit for a specific amount and period of time |
| Collateral | Property that is pledged to guarantee payment of a loan |
| Collection agency | Business that collects unpaid debt for other companies or organizations for a fee |
| Cosigner | Responsible person who signs a loan as a co-borrower and thereby agrees to pay the obligation if the primary borrower fails to do so |
| Consumer finance company | Businesses that specialize in making small or personal loans, usually for borrower’s with limited credit history or low credit rating |
| Credit | Loaning of money, goods, services at present in exchange for promise of future payment |
| Credit counseling | Guidance provided by trained people who help consumers learn to live within their means |
| Creditor | Person or business who supplies money, goods, or services to debtors |
| Credit bureau/ credit reporting agency | Organization that compiles record of financial and credit transactions of credit users and the credit worthiness of consumers who sell information to creditors, landlords, insurers, employers, & other businesses. Examples: Experian, TransUnion, Equifax |
| Credit history | Pattern of past behavior in regard to repaying debt |
| Credit limit | Maximum amount of credit that a lender will extend to a borrower |
| Credit rating | Lender’s evaluation of a person’s willingness and ability to pay debts as judged by character, capacity, and capital |
| Credit report | Record of a particular consumer’s use of credit and account payment patterns |
| Credit score | Numerical rating, based on credit report information;represents one measure of a person’s level of credit worthiness; # provided by credit reporting agencies |
| Debt consolidation loan | Loan combining all existing debt into new loan with more manageable payment schedule |
| Debtor | Person or business who borrows money, goods, or services from creditors |
| Default | Failure to fulfill the obligations of loan contract, may result in repossession/foreclosure |
| Delinquent | Overdue according to terms of sales/loan contract |
| Down payment | Part of purchase price paid at the time of purchase, reducing the amount borrowed |
| Due date | Maturity date for payment of a loan, bond, or other invoice |
| Finance charge | Cost for the use of credit, including interest charges and any other fees |
| Foreclosure | Taking away real property by the creditor, due to failure to make loan payments |
| Grace period | Period of time during which the balance on a credit card may be paid in full to avoid finance charges; time between date billed and date payment is due |
| Garnishment | Legal witholding of a sum from a person’s wages in order to collect a debt |
| Impulse buying | Buying items that are not really needed |
| Installment loan | Borrowing set amount of money & repaying it plus finance charges in a series of equal scheduled payments; used for expensive (big ticket) items like cars, appliances, homes |
| Interest | Fee paid for the opportunity to use someone else’s money over a period of time, aka finance charges, may be simple or compound, formula for simple I=PRT |
| Late fee | Additional charge that may be added when payment is not received on time |
| Lien | Claim upon property to satisfy debt; debt must be paid before ownership title is clear |
| Liabilities | Amounts owed: such as unpaid bills, credit card charges, personal loans, and taxes |
| Loan shark | Unlicensed lender who operates illegally and charges excessive interest & fees |
| Net worth | Difference between your assets and your liabilities. Expressed by the formula: assets – liabilities = net worth/net equity |
| Open-end credit | Credit that can be used repeatedly for new purchases by paying a portion on a regular basis. Aka line of credit |
| Principle | Original amount borrowed |
| Regular charge account | Type of sales credit that allows customers to purchase goods and services on credit and pay the bill in full in 25-30 days. Generally, no interest charge; however, you may be charged interest if you do not pay the full amount. Business to business transaction. |
| Repossession | Taking away personal property by the creditor, due to failure to make loan payments |
| Revolving credit | Form of credit in which the total amount of the bill does not have to be paid each month; however, a finance charge will be calculated the unpaid balance. Additional purchases, within credit limit, can be made even though money is owed on previous purchases. Ex: credit cards, charge cards, equity loan |
| Right of rescission | The right, provided by the Truth in Lending Act, that gives borrowers up to three business days to cancel a loan or other credit transaction for which their home is pledged as security, aka “Cooling off period” |
| Sales credit | Credit (provided by the retailer or provider) used to purchase goods and services; ex: Belk’s offers customers a Belk charge card |
| Single payment loan | Credit where you borrow an amount of money and repay that amount plus finance charges back in one payment |
| Secured loan | Credit that is backed by a pledge of property or a cosigner |
| Time | Period for which interest is earned |
| Unsecured loan | Credit that only requires a signature promising to repay the loan as stated in the contract |
