Chapter 10

Balloon payment

A clause that requires you to make a final payment that is much larger than the regular payments.

Credit bureau

A company that collects information about consumers' credit history and sells it to lenders.

Cosign a loan

A contractual agreement to pay a debt if the borrower does not pay it.

Bankruptcy

A legal process in which people who cannot pay their debts must surrender most of their property.

Credit rating

A measure of your creditworthiness. (Your credit report will base the score off of: payment history, current debt, length of credit history, new accounts, and the kind of credit you use.)

Capacity

A measure of your financial ability to repay a loan.

Creditworthiness

A measure of your reliability to repay a loan.

Character

A measure of your sense of financial responsibility.

Credit history

A record of your past borrowing and repayments.

debt consolidation loan

Designed to pay off all the smaller loans and give you one payment to make each month.

True-named fraud

Involves using someone else's identity to get cash or buy products using credit.

Secure loan

It is backed by something of value pledged to insure payment.

Installment loan

It is repaid in a certain number of payments with a certain interest rate.

Acceleration clause

It says the entire debt is immediately due if you miss a single payment.

Credit

The ability to borrow money in return for a promise of future repayment.

Equity

The difference between the amount owed on a home and the home's value.

Annual percentage rate (APR)

The finance charge calculated as a percentage of the amount borrowed.

Collateral

The property pledged to back a loan.

Grace period

The time between the billing date and the payment due date when no interest is charged.

Finance Charge

The total cost a borrower must pay for a loan, including all interest and fees.

Capital

The value of what you own, including savings, investments, and property.

Revolving charge account

This account allows you to carry a balance from one month to the next.

Credit limit

This is the maximum amount you are allowed to charge. (If you go over your limit, you will have to pay a penalty.)

Unsecured loan

This loan is bot backed by any collateral. (The lender grants you credit based on your creditworthiness alone.)

Regular charge account

With this type of account you must pay your balance each month in full within a specific amount of time.