Personal Finance W1 Chapter 8

Car Lease

A Long-Term rental agreement; A form of secured long-term debt.

Garnishment

A courtordered attachment that allows a lender to take monies owed directly from a borrower's paycheck; only allowed as part of a court judgment

Home Equity Loan

A home equity loan means borrowing money against your house. Like any other debt, home equity loans are a bad idea. They often come with higher, variable interest rates and if there comes a time when you can't make the payments, you risk losing your home!

Bankrupcy

A legal procedure for dealing with debt when an individual or business cannot repay what they owe

Reverse Mortgage

A reverse mortgage is when a homeowner borrows against the equity in their home and obtains monthly, tax-free payments from the lender. This mortgage is a bad idea because you are putting a paid-for home at risk, and the fees are horrible. In fact, the FTC claims that reverse mortgages have the most fraud in the mortgage business.

Credit Bureaus

Agencies or credit reporting agencies.

Adjustable Rate Mortgage(ARM)

An ARM is a mortgage with an interest rate that changes based on market conditions. The intention is to transfer the risk of higher interest rates to you and, in return, the lender gives a lower rate up front. Since they can qualify for more home, many people find this mortgage appealing; however, as many homeowners learned in the economic downturn, if your rate adjusts higher or you lose your job, your payment can quickly become too much for you to afford.

Unsecured Loan

Given to borrowers based on their financial resources or ability to repay the loan. Nothing "secures" the loan. In other words, the lender does not have rights to a specific asset if the loan is not repaid. Personal loans, student loans, and personal lines of credit are examples of unsecured loans.

Foreclosure

Process by which the holder of a mortgage sells the property of a homeowner who has not made interest and/or principal payments on time as stipulated in the mortgage contract

Repossession

Process of a lender taking something back (like a car) for failure to make payments

Secured Loan

usually needed when borrowing large amounts of money. The loan is "secured" with collateral. In other words, if you default on the loan and your house was used as collateral, the lender would take the house. Secured loans usually have lower interest rates and longer repayment terms. Automobile loans, mortgages and home equity loans are examples of secured loans.