Chapter 4

variable rate

An interest rate on a loan or security that fluctuates over time, because it is based on an underlying benchmark interest rate or index that changes periodically.

fixed rate

a fully amortizing mortgage loan where the interest rate on the note remains the same through the term of the loan, as opposed to loans where the interest rate may adjust or "float".

bankruptcy

a legal procedure for dealing with debt when an individual or business cannot repay what they owe

credit score

a measure of an individual's credit risk; calculated from a credit report using a standardized formula

adjustable rate mortgage

a mortgage whose rate of interest is adjusted periodically to reflect market conditions.

garnishment

a court ordered attachment that allows a lender to take monies owed directly from a borrowers paycheck

surrender of collateral

a debtor can give up property to the creditor in exchange for a clean slate

depreciation

a decrease or loss of value

credit report

a detailed report of an individual's credit history

unsecured loan

A loan that is issued and supported only by the borrower's creditworthiness, rather than by a type of collateral. An unsecured loan is one that is obtained without the use of property as collateral for the loan. Borrowers generally must have high credit ratings to be approved for an unsecured loan. Examples of Unsecured Loans: Credit Cards Personal (Signature) Loans Personal Lines of Credit Student Loans (note that tax returns can be garnished to repay delinquent student loans) Some Home Improvement Loans

90 days same as cash

No charges if you pay it off during the time period you are given, if not you get hit with interest on not just the remaining payment but the whole entire purchase.

secure loans

Secured loans are those loans that are protected by an asset or collateral of some sort. The item purchased, such as a home or a car, can be used as collateral, and a lien is placed on such item. The finance company or bank will hold the deed or title until the loan has been paid in full, including interest and all applicable fees. Other items such as stocks, bonds, or personal property can be put up to secure a loan as well. Examples of Secured Loans: Mortgage Home Equity Line of Credit Auto Loan (New and Used) Boat Loan Recreational Vehicle Loan

annual fee

a yearly fee that's charged by the credit company for the convenience of the credit card

layaway

an agreement in which the seller reserves an item for a buyer until the buyer pays for the item in full

tax reduction

an expense, such as a charitable contribution, that can be deducted from one's taxable income

introductory rate

an interest rate charged to a costumer during the early stages of a loan; the rate often goes up after a specified period of time

reverse rate mortgage

borrowing against the equity in their home and obtaining monthly, tax-free payments from the lender. bad idea, putting a paid-for-home at risk

home equity loan

borrowing money against your house. like any other debt, home equity loans are a bad idea. they often come with higher, variable interest rates and if there comes a time when you cant make the payments you may lose your home

delinquency

broadly refers to a borrower not being current on his or her payments

annual percentage rate

cost of borrowing money on an annual basis; takes into account the interest rate and other related fees on a loan

credit counseling

help to build your interest rates and lower payments, but at a price. if you go to one of these places and then file for a mortgage loan you will be treated as if you had filed for ch. 13 bankruptcy.

car lease

is a long-term rental agreement; a form of secured long-term debt

debt snowball

preferred method of debt repayment; includes a list of all debts organized from smallest to largest balance; minimum payments are made to all debts except for the smallest, which is attacked with the largest possible payments

foreclosure

process by which the owner of a house does not pay their mortgage payments on time and must sell their property

reposession

process of a lender taking something back for failure to make payments

national debt

the amount of money a country owes.

personal debt

the amount of money an individual person owes

revolving credit

this is credit in which a pre established amount of money is borrowed repeatedly as long as the account is in good standing

installment

this is credit that you use to borrow money and promise to repay in equal amounts over a specific period of time

loan term

time from that a loan agreement is in force, and before or at the end of which the loan should either be repaid or renegotiated for another term

credit card

type of card issued by a bank that allows users to finance a purchase