Personal FInance Chapter 6

credit

an arrangement to receive cash, goods, or services now and pay for them in the future

creditor

an entity that lends money

open-end credit

credit as a loan with a certain limit on the amount of money you can borrow for a variety of goods and services

closed-end credit

credit as a one-time loan that you will pay back over a specified period of time in payments of equal amounts.

bankruptcy

a legal process in which some or all of the assets of a debtor are distributed among the creditors because the debtor is unable to pay his or her debts

credit rating

a measure of a person's ability and willingness to make credit payments on time

grace period

a time period during which no finance charges will be added to your account

cosigning

agreeing to be responsible for loan payments if the other person fails to make them

annual percentage rate (APR)

the cost of credit on a yearly basis, expressed as a percentage

net income

the income you receive (take-home pay, allowance, gifts, and interest)

simple interest

the interest computed only on the principal, the amount that you borrow

line of credit

the maximum amount of money a creditor will allow a credit user to borrow

minimum monthly payment

the smallest amount you can pay and remain a borrower in good standing

finance charge

the total dollar amount you pay to use credit

consumer credit

the use of credit for personal needs