Unit 4 Key Terms

Secured Loan

A loan that is protected by Collateral

Fixed Rate Loan

A loan with a rate that does not change over the life of the loan.

Grace Period

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

Amortization

Refers to how loan payments are applied to certain types of loans

Loan

Borrowed money with an agreement to repay it with interest with a certain amount of time

Credit

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

Creditor

It is an entity, a financial institution, merchant, or individual, that lends money

Closed-End Credit

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

Unsecured Loan

Loan that is not protected by Collateral

Collateral

Something valuable that the lender can take as repayment if you default on your loan and can't pay it back

Schumer Box

Table that summarizes the costs associated with a credit card

Credit Limit

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

FICO Score

The most commonly used credit scoring system

Finance Charge

Total dollar amount you pay to use credit

Cash Advance

allows you to use your credit card to get a short-term cash loan at a bank or ATM. Think of it as using your credit card to "buy" cash rather than goods or services.

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

Credit Score

number that reflects your financial trustworthiness based on your credit report

Property Lien

A legal claim on assets that allows the holder to obtain access to property if debts are not paid

Credit Bureau

An agency that collects, organizes, and disseminates credit information to creditors and potential creditors

Cosigner

If you wipe out on your loan, he/she is one responsible for its repayment

Consumer Credit

Use of credit for personal needs

Annual Fee

a fee that you're required to pay every year to remain a cardholder and enjoy the card's rewards and benefits

Variable Rate Loan

a loan in which the interest rate charged on the outstanding balance varies as market interest rates change.

Credit Report

a report of all your financial history

Balance Transfer

a type of credit card transaction in which debt is moved from one account to another