Chapter 10

subprime mortgages

higher interest rate mortgage loans made to people with poor credit scores

liability coverage

insurance that covers you against any damage you do to other people or their property

APR annual percentage rate

interest rate charges on personal loans are reported

federal Perkins loans

loans for students with "exceptional financial need"

unsecured loan

loans that have no collateral pledged against the loan

secured loan

a loan that has some asset pledged against the loan so the lender is assured of winding up with some valuable asset if the borrower fails to pay off the loan

personal loans

a type of credit that is typically started at the time of purchase for a specific asset (car, boat,)

policy riders

additional insurance coverage to cover things such as jewelry or valuable heirlooms that are often not fully covered by a typical insurance policy

ARM

adjustable rate mortgage

a home equity loan

allows a homeowner to borrow against the equity in the home- that is the difference between the homes value and the amount owed to a lender

a 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

a lease

essentially a long term rental agreement

cosigner

someone who agrees to sign the loan document and to repay the loan if the original borrower stops making payments

collateral

the asset that have been pledged against loan repayment

mortgage

the common term for the type of loan people take to obtain a home

maturity date

the date at which the loan will be completely repaid

fixed rate martgage

the interest rate remains the same for the life of the loan

federal stafford loans

the most common type of federal education loans

Down payment

the portion of the purchase price that the buyer is required to pay

defaults

when the borrower stops making the loan payments