Econ and Personal Finance Vocabulary Unit 2 Credit

refund anticipation loans

A loan provided by a third party against a taxpayer's expected refund. The tax refund anticipation loan is not provided by the U.S. Treasury or the IRS and is subject to the interest and fees set by the lender.

debt snow ball

A method of debt repayment in which the debtor lists each of his/her debts from smallest to largest (not including the mortgage), then devotes extra money each month to paying off the smallest debt first while making only minimum monthly payments on all of the other debts.

credit card statement

A periodic report that credit card companies issue to credit card holders showing their recent transactions, balance due and other key information. Billing statements are issued at the end of each billing cycle, which is usually about one month long.

Direct Loan Program

A program that provides low-interest loans to postsecondary students and their parents. The William D. Ford Federal Direct Loan Program is issued and managed by the U.S. Department of Education and is the only government-backed student loan program in the United States.

secured credit cards

A type of credit card that is backed by a savings account used as collateral on the credit available with the card. Money is deposited and held in the account backing the card. The limit will be based on both your previous credit history and the amount deposited in the account.

finance charges

In United States law, a finance charge is any fee representing the cost of credit, or the cost of borrowing. It is interest accrued on, and fees charged for, some forms of credit. It includes not only interest but other charges as well, such as financial transaction fees. ... Interest is a synonym for finance charge.

minimum payment

Making the monthly minimum payment on time is the least a consumer needs to do, to avoid late fees and to have a good repayment history on his credit report. The amount of the minimum monthly payment is calculated as a small percentage of the consumer's total credit balance.

SEC

a U.S. government agency that oversees securities transactions, activities of financial professionals and mutual fund trading to prevent fraud and intentional deception. The SEC consists of five commissioners who serve staggered five-year terms.

credit limit

refers to the maximum amount of credit a financial institution extends to a client through a line of credit as well as the maximum amount a credit card company allows a borrower to spend on a single card.

grace period

simple elegance or refinement of movement.

collateral

something pledged as security for repayment of a loan, to be forfeited in the event of a default.

debt

something, typically money, that is owed or due.

debt consolidation

taking out a new loan to pay off a number of liabilities and consumer debts, generally unsecured ones. In effect, multiple debts are combined into a single, larger piece of debt, usually with more favorable pay-off terms: a lower interest rate, lower monthly payment or both.

credit

the ability of a customer to obtain goods or services before payment, based on the trust that payment will be made in the future.

repossession

the action of retaking possession of something, in particular when a buyer defaults on payments.

foreclosure

the action of taking possession of a mortgaged property when the mortgagor fails to keep up their mortgage payments.

annual percentage rate (APR)

the annual rate charged for borrowing or earned through an investment, and is expressed as a percentage that represents the actual yearly cost of funds over the term of a loan.

garnishing wages

A legal process whereby payments towards a debt owed by an individual can be paid by a third party - which holds money or property that is due to the individual - directly to the creditor. The third party in such a case is generally the individual's employer and is known as the garnishee.

revolving debt

the kind of debt that credit cards offer and is usually an easy way to get credit. It can be a useful tool when used with discipline. Revolving debt is slightly complicated compared with a typical loan. There is no need to reapply for credit whenever you need more money.

FICO

the largest and best known of several companies that provide software for calculating a person's credit score.

late payment fees

(a late charge) is charged to a borrower who misses paying at least their minimum payment by the payment deadline. In order to avoid late fees, ensure that you pay at least the minimum amount by the due date.

line of credit

an amount of credit extended to a borrower.

deficiency clause

An arrangement in which a party provides a firm with funds to cover any shortfalls arising from capital or cash flow restraints, allowing the company to service its debt. A deficiency agreement will usually have a cumulative limit specified by the lending party.

annual fee

Any fee that is charged on an annual (yearly) basis. One of the most common occurrences of an annual fee is the fee that is charged by some credit card companies to their credit card holders, simply for having the credit card.

Average Daily Balance

a common accounting method where credit card interest charges are calculated using the total amount due on a card at the end of each day. The average daily balance totals each day's balance for the billing cycle and divides by the total number of days in the billing cycle.

lease

a contract by which one party conveys land, property, services, etc., to another for a specified time, usually in return for a periodic payment.

credit card agreement

a contract that outlines the terms, conditions, pricing, and penalties of the credit card.

credit report

a detailed report of an individual's credit history. Credit bureaus collect information and create credit reports based on that information, and lenders use the reports along with other details to determine loan applicants' credit worthiness.

mortgage

a legal agreement by which a bank or other creditor lends money at interest in exchange for taking title of the debtor's property, with the condition that the conveyance of title becomes void upon the payment of the debt.

adjustable rate mortgage (ARM)

a mortgage loan with the interest rate on the note periodically adjusted based on an index which reflects the cost to the lender of borrowing on the credit markets. The loan may be offered at the lender's standard variable rate/base rate.

credit score

a number assigned to a person that indicates to lenders their capacity to repay a loan.

creditor

a person or company to whom money is owed.

debtor

a person or institution that owes a sum of money.

wage earners

a person who works for wages or salary.

multiplier effect

a phenomenon whereby a given change in a particular input, such as government spending, causes a larger change in an output, such as gross domestic product.

open-end credit

a preapproved loan between a financial institution and borrower that may be used repeatedly up to a certain limit and can subsequently be paid back prior to payments coming due. The preapproved amount will be set out in the agreement between the lender and the borrower.

payday loans

a relatively small amount of money lent at a high rate of interest on the agreement that it will be repaid when the borrower receives their next paycheck.

lien

a right to keep possession of property belonging to another person until a debt owed by that person is discharged.

closed-end credit

a type of credit that should be repaid in full amount by the end of the term, by a specified date. The repayment includes all the interests and financial charges agreed at the signing of the credit agreement. Closed-end credits include all kinds of mortgage lending and car loans.

home equity loans

a type of loan in which the borrower uses the equity of his or her home as collateral. The loan amount is determined by the value of the property, and the value of the property is determined by an appraiser from the lending institution.

car title loans

a type of secured loan where borrowers can use their vehicle title as collateral. Borrowers who get title loans must allow a lender to place a lien on their car title, and temporarily surrender the hard copy of their vehicle title, in exchange for a loan amount.

reward cards

an incentive program operated by credit card companies where a percentage of the amount spent is paid back to the card holder. ... Rewards based products generally have higher Annual percentage rate.

history of repayment

an indication for lenders and creditors whether an individual is a lending risk due to a history of late or missed payments.

limited purpose credit cards

credit cards that can be used only in a specific store or group of stores, or for a specific purpose. The JCPenney Regular Charge Card and the Radio Shack Answer Plus are examples.

alternative loans

educational loan programs established by private lenders to supplement the funding that students and parents receive from federal and state sources.

default

failure to fulfill an obligation, especially to repay a loan or appear in a court of law.

bankruptcy

he state of being completely lacking in a particular quality or value.

balance (in credit terms)

in a margin account, is the amount of funds deposited in the customer's account following the successful execution of a short sale order.

installment credit

is generally repaid in equal monthly payments that include interest and a portion of principal. It is a favored method of consumer financing for big-ticket items such as cars and appliances.

required minimum amount

is the amount that traditional, SEP or SIMPLE IRA owners and qualified plan participants must begin distributing from their retirement accounts by April 1 following the year they reach age 70.5.

interest

money paid regularly at a particular rate for the use of money lent, or for delaying the repayment of a debt.

fixed rate mortgages

often referred to as a "vanilla wafer" mortgage loan, is a fully amortizing mortgage loan where the interest rate on the note remains the same through the term of the loan, as opposed to loans where the interest rate may adjust or "float".

pre-qualify

qualify in advance to take part in something.

unsecured debt

refers to any type of debt or general obligation that is not protected by a guarantor, or collateralized by a lien on specific assets of the borrower in the case of a bankruptcy or liquidation or failure to meet the terms for repayment.

credit reporting agencies

refers to businesses that maintain historical information pertaining to credit experience on individuals or businesses. The data are collected from various sources, most commonly firms extending credit such as credit card companies, banks and credit unions.