Personal Finance Vocabulary
Terms
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- Debt
- or the entire amount of money you owe to lenders.
- Universal Default
- clause in their agreements.
- Grace Period
- is the length of time you have before you start accumulating interest.
- Credit
- someone is willing to loan you money.
- Principal
- in exchange for you promise to repay it, usually with interest.
- Over-the-limit fee
- for spending more than your credit limit.
- Credit Report
- is simply a record of your personal financial transactions or credit history.
- Collateral
- is an asset of value that lenders can take from you if you don't repay the loan as promised.
- Finance Charge
- represents the actual dollar cost of using credit to maintain a balance.
- Credit Card
- Some types of cards can be used just about anywhere, some only at a specific place. no payoff deadline. monthly minimum payments vary, based on the balance. usually has the highest rate of these four types of credit.
- Loan Term
- is the length of time you have to pay off the loan.
- Bankruptcy
- is a legal process to get out of debt when you can no longer make all your required payments.
- Capital
- lenders take comfort in knowing that you have personal items of value.
- Annual Percentage Rate (APR)
- which tells you the cost of the loan per year as a percentage of the amount borrowed.
- Interest
- is the amount you pay to use someone else's money.
- Capacity
- lenders' chief concern s whether you are able to repay a loan.
- Installment Loan
- typically used for large purchases such as a car or an appliance. loan term can vary from a few months to many years. monthly payment amounts are often set for the life of the loan. usually has a lower interest rate than a credit card.
- Credit History
- lenders look at it to see how well you've managed credit in the past.
- Annual Fee
- is a yearly charge you pay the privilege of using credit.
- Student Loan
- used for tuition and other college expenses. depending on your income level. some loan programs let you delay making payments until you graduate. loan term is usually up to 10 years, depending on the amount borrowed. monthly payment amounts are usually set annually, when interest rates are adjusted. usually has a lower interest rate than an installment loan. may provide an income tax break on interest paid to the lender.
- Credit Score
- is a number that reflects your creditworthiness.
- Late Fee
- is obviously a penalty for making a payment after the due date.
- Character
- lenders want to know if you're trustworthy.
- Credit Limit
- is the maximum amount of credit a lender will extend to a customer.
- Origination Fee
- is a charge for setting up the loan.