Chapter 6 What Is Consumer Credit

Collateral

is a from of security to help guarantee that the creditor will be repaid

Net income

is the income you recieve(your take-home pay, allowance, gifts, interest on bank accounts, and so on)

Simple interest

is the interest computed only on the principal, the amount that you borrow

Line of credit

is the maximum amount of money the creditor has made available to you

Credit rating

is the measure of a person's ability and willingness to make credit payments on time

Minimum monthly payment

is the smallest amount you can pay and remain a borrower in good standing

Finance charge

is the total dollar amount you pay to use credit

Bankruptcy

s 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.

Interest

s a periodic charge in exchange for the use of credit

Annual Percentage rate (APR)

shows how much credit costs you on a yearly basis, expressed as a percentage.

Principal

the amount you borrow

Indebtedness

the condition of being deeply in debt

Consumer Credit

the use of credit for personal needs, dates back to colonial times.

Open-end credit

you borrow money for a variety of goods and services

Closed-end credit

you receive a one-time loan that you will pay back over a specific period of time and in payments of equal amounts

Creditor

an entity (a bank, finance company, credit union, business, or individual) to which money is owed-agrees to advance an individual the money, goods, or services.

Co-signing

a loan means that you agree to be responsible for loan payments if the other party fails to make them

Grace period

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

Credit

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

Debt collectors

businesses that collect debts for creditors.