Chapter 10 Vocab
Policy Rider
Additional insurance coverage to cover things such as jewelry or valuable heirlooms that are often not fully covered by a typical insurance policy
Home Equity Loan
Allows a homeowner to borrow against the equity in his or her home. Equity is the difference between the home's value and the amount owed to a lender
Collateral
Assets that have been pledged against loan repayment.
Annual Percentage Rate
The rate that factors in all the financing costs so that borrowers know exactly what they are paying and can make informed decisions.
Mortgage
Type of loan taken out to obtain a home
Secured Loan
A loan that has some asset pledged against the loan so that the lender is assured of winding up with some valuable asset if the borrower fails to pay off the loan
Lease
A long-term rental agreement
Down Payment
A required portion of the purchase price paid at the time of purchase
Unsecured Loan
Loans that have no collateral pledged against the loan.
Cosigner
Someone other than the borrower who agrees to sign the loan document and to repay the loan if the original borrower stops making payments
Personal Loan
a type of credit that is typically started at the time of purchase for a specific asset
Line of Credit
an agreement to allow borrowing as needed up to a certain amount of money
Teaser Rate
an extremely low interest rate for a short period of time that is used as a deal sweetener
Subprime Mortgage
higher interest rate mortgage loans made to people with poor credit scores
Liability Coverage
insurance to protect against claims for bodily injury to another person or damage to another person's property
Federal Perkins Loans
similar to Stafford loans except they are for students with "exceptional" financial need. Perkins loans carry a lower interest rate and offer a longer grace period before students have to begin repayment
Defaults
situations in which borrowers stop making payments on their loans
Maturity Date
the date at which the loan will be completely repaid
Adjustable Rate Mortgage
the interest rate may go up or down over time
Fixed Rate Mortgage
the interest rate remains the same for the life of the loan
Federal Stafford Loans
the most common type of federal education loans. They come in two forms: subsidized and unsubsidized.