Chapter 10 Vocab

Policy Rider

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

Home Equity Loan

Allows a homeowner to borrow against the equity in his or her home. Equity is the difference between the home's value and the amount owed to a lender

Collateral

Assets that have been pledged against loan repayment.

Annual Percentage Rate

The rate that factors in all the financing costs so that borrowers know exactly what they are paying and can make informed decisions.

Mortgage

Type of loan taken out to obtain a home

Secured Loan

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

Lease

A long-term rental agreement

Down Payment

A required portion of the purchase price paid at the time of purchase

Unsecured Loan

Loans that have no collateral pledged against the loan.

Cosigner

Someone other than the borrower who agrees to sign the loan document and to repay the loan if the original borrower stops making payments

Personal Loan

a type of credit that is typically started at the time of purchase for a specific asset

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

Subprime Mortgage

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

Liability Coverage

insurance to protect against claims for bodily injury to another person or damage to another person's property

Federal Perkins Loans

similar to Stafford loans except they are for students with "exceptional" financial need. Perkins loans carry a lower interest rate and offer a longer grace period before students have to begin repayment

Defaults

situations in which borrowers stop making payments on their loans

Maturity Date

the date at which the loan will be completely repaid

Adjustable Rate Mortgage

the interest rate may go up or down over time

Fixed Rate Mortgage

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

Federal Stafford Loans

the most common type of federal education loans. They come in two forms: subsidized and unsubsidized.