Personal Financial Literacy Unit 3 Lesson 1

unsecured debt

money loaned without requiring collateral

line of credit

the maximum amount that may be borrowed in a revolving credit account

3) Choose the best answer. Which answer is NOT a form of installment credit?

Credit Card

2) Choose the best answer. The features of ___ credit include a predetermined length known as the term of the loan.

Installment

4) Choose the best answer. A ___ might be ideal for a small business that requires financial flexibility to meet changing market conditions.

Line of credit

installment credit

a loan in which a borrower makes scheduled, periodic payments until the face value is repaid

collateralized credit

a loan secured by an asset that the lender may legally seize in case of default

personal identification number (PIN)

a number assigned to an account holder to validate transactions

revolving credit

access to money that may be borrowed at any time and for any reason up to a maximum amount set by the lender

default

failure to pay back a loan

6) Match the transactions with Debit card or Credit card. The cardholder may withdraw cash from an ATM or receive cash back from a merchant without fees. This card provides greater protection in case of fraud or theft. This card is tied to a revolving credit account with a line of credit. Card issuers make money by charging fees and interest to cardholders. The card is tied to a bank account and works much like a paper check.

Debit Card Credit Card Credit Card Credit Card Debit Card

1) Match the definitions with the terms. the maximum amount that may be borrowed in a revolving credit account a number assigned to an account holder to validate transactions a loan secured by an asset that the lender may legally seize in case of default failure to pay back a loan a loan in which a borrower makes scheduled, periodic payments until the face value is repaid money loaned without requiring collateral access to money that may be borrowed at any time and for any reason up to a maximum amount set by the lender

Line of Credit Personal Identification Number Collateralized Credit Default Installment Credit Unsecured Debt Revolving Credit

5) Choose the best answer. What is the benefit of collateralized credit to consumers?

The collateral allows lenders to offer lower interest rates.