| A | B |
|---|
| Credit | Any arrangement where you get "stuff" (money, goods, services), and agree to pay for it in the future |
| Loan | An agreement where you are credited with a fixed amount (usually of money) for a fixed period of time, usually with interest. |
| Principal | The amount you borrow |
| Interest Rate | The percentage charged for the privilege of borrowing money |
| Term | The amount of time you have to repay your principal |
| Lender | Person or business who is extending the credit (loan) |
| Borrower | Person taking out the loan |
| Creditworthiness | Describes how likely you are to repay a loan |
| Installment Loan | Loan used to finance a specific purchase for a specific amount of timer; regular payments pay the interest and portion of the principal |
| Revolving Credit | Open line of credit that can be used for any purchases as long as you're under the limit; payments vary monthly based on size of the debt |
| Secured Debt | Debt tied to a specific tangible asset that can be used as collateral and repossessed if payments are not made |
| Unsecured Debt | Debt NOT tied to a specific asset or that cannot be repossessed if payments are not made |
| Collateral | Something valuable that the lender can take as payment if you can't pay back you loan (like a house or car) |
| Variable Rate Loan | Interest rate can change, based on prime rate or index rate, over the course of the loan. |
| Fixed Rate Loan | Interest rate is determined before loan is granted and remains constant as long as on-time payments are being made |
| Amortization | The paying off of debt with a fixed repayment schedule in regular installments over a period of time. |
