Personal FInance Chapter 6
credit
an arrangement to receive cash, goods, or services now and pay for them in the future
creditor
an entity that lends money
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
closed-end credit
credit as a one-time loan that you will pay back over a specified period of time in payments of equal amounts.
bankruptcy
a legal process in which some or all of the assets of a debtor are distributed among the creditors because the debtor is unable to pay his or her debts
credit rating
a measure of a person's ability and willingness to make credit payments on time
grace period
a time period during which no finance charges will be added to your account
cosigning
agreeing to be responsible for loan payments if the other person fails to make them
annual percentage rate (APR)
the cost of credit on a yearly basis, expressed as a percentage
net income
the income you receive (take-home pay, allowance, gifts, and interest)
simple interest
the interest computed only on the principal, the amount that you borrow
line of credit
the maximum amount of money a creditor will allow a credit user to borrow
minimum monthly payment
the smallest amount you can pay and remain a borrower in good standing
finance charge
the total dollar amount you pay to use credit
consumer credit
the use of credit for personal needs