Chapter 4 - Debt

Question 0

Installment debt

Answer 0

Repayment of a debt divided into equal amounts, or installments, over a period of time

Question 1

Credit

Answer 1

Receiving of money either directly or indirectly to buy goods and services in the present with the promise to pay for them in the future

Question 2

Mortgage

Answer 2

Long-term debt owed on real property such as houses, buildings and land; an installment debt

Question 3

Commercial bank

Answer 3

Bank that offers a wide range of banking services; main functions are to accept deposits, lend money, transfer funds

Question 4

Credit union

Answer 4

Depository institution owned and operated by its members to provide savings accounts and low-interest loans to its members only

Question 5

Principal

Answer 5

Amount of money borrowed or lent in a loan

Question 6

Interest

Answer 6

Amount a borrower must pay for the use of someone else’s money. Payment a creditor receives when lending money (%)

Question 7

Annual percentage rate (APR)

Answer 7

Cost of credit expressed as a yearly percentage that includes all costs of borrowed money. Includes all hidden expenses

Question 8

Finance company

Answer 8

Company that takes over contracts for installment debts from stores and adds a fee for collecting the debt; also makes loans directly to consumers

Question 9

Charge account

Answer 9

Agreement that allows you to make purchases from a business without using cash; similar to “running up a tab”

Question 10

Debit card

Answer 10

Credit card that’s acts like a checking account (your money)

Question 11

Credit card

Answer 11

Card used to create an agreement that allows a person to make purchases without paying cash

Question 12

Regular charge account

Answer 12

Also known as a 30-day charge. No interest is charged, but the entire bill is due at that time. Gas cards are an example

Question 13

Revolving charge account

Answer 13

Agreement that allows a person to make purchases without paying cash. Purchases may be paid off gradually but interest is charged on the unpaid balance. Ex: department store cards

Question 14

Finance charge

Answer 14

Cost of credit expressed in dollars and cents for borrowing money or not paying it back in time

Question 15

Budget

Answer 15

Plan for spending and saving income

Question 16

Fixed expenses

Answer 16

Payments that must be made that are relatively consistent over time (rent, mortgage, insurance)

Question 17

Flexible expenses

Answer 17

Payments that must be made that may vary greatly from month to month

Question 18

Credit bureau

Answer 18

Private business that investigates a persons income, current debt, character and history to determine the risk involved in lending that persons money

Question 19

Credit check

Answer 19

Term used to describe the function of a credit bureau

Question 20

Credit rating

Answer 20

Rating of the risk involved in lending money to an individual or business

Question 21

Collateral

Answer 21

Something of value that a person uses as a promise to repay a loan

Question 22

Secured loan

Answer 22

A loan that is backed by collateral

Question 23

Unsecured loan

Answer 23

Loan not guaranteed by anything other than the promise to repay it

Question 24

Cosigner

Answer 24

Person who signs a loan contract along with the borrower and promises to repay the loan if the borrower does not

Question 25

Usury law

Answer 25

Law restricting the interest that can be charged for credit

Question 26

A.T.M.

Answer 26

Automated teller machine that allows consumers to perform banking tasks without the help of a teller

Question 27

Bankruptcy

Answer 27

The state of legally having been declared unable to pay off debts owed with available income. Even if declared bankrupt you must pay taxes

Question 28

Refinance

Answer 28

To satisfy a debt by making another loan with new terms

Question 29

Home equity

Answer 29

The difference between what a home is worth and what is owed

Question 30

Durable goods/Consumer durable

Answer 30

Manufactured item that a person will use for a long period of time

Question 31

Credit limit

Answer 31

Maximum amount of goods and services that can be bought on a promise to repay

Question 32

Installment charge account

Answer 32

Agreement that allows a person to make purchases without paying cash for major items to be paid through equal payments or installments over a period of time with the use of credit card