Personal Finance Final
Terms in this set (28)
The ability to obtain goods, money, or services in return for a promise to pay at some later date. Advantage of credit: allows you to buy something right away. Disadvantage: promotes impulsive buying
Annual Percentage Rate (APR)
the annual rate that is charged for borrowing. APR is the biggest cost of using a credit card.
a sum of money lent or invested on which interest is paid.
money paid regularly at a particular rate for the use of money
A credit report is a report detailing a person's financial history specifically related to their ability to repay borrowed money.
a number assigned to a person that indicates to lenders their capacity to repay a loan. Items that effect your score: ability to pay back loans, amt of existing debt, Should check your score 3 x/year.
A legal proceeding involving a person or business that is unable to repay outstanding debts. You DO NOT eliminate all your debt.
Four C's of Credit
Character (history of paying bills on time) , Capacity (how much debt you already have) , Collateral (what assets do you own in case you don't make payment) , Capital (how much money do you have saved?)
Average Daily Balance
a credit card accounting method where interest charges are based on the amount owed at the end of each day.each day's balance for the billing cycle is summed then divided by the number of days in the cycle, to compute the average daily balance.
paying off debt in regular installments
the amount of pay you earn before taxes and deductions
The amount of pay you "take home" after taxes and deductions
Those costs that are the same every month (EX: mortgage, rent, car payments)
Those expenses that change from month to month (EX: food, entertainment, transportation)
a reduction in the value of an asset with the passage of time,
A list of all planned income and expenses
Refers to Social Security
Multipurpose credit card
a credit card that can be used anywhere
Single purpose credit card
a credit card issued by a store and the card can only be used at THAT store
A legal agreement that gives the conditional right of ownership on property (usually a house) by its owner to a lender as security for the loan. A larger downpayment will usually = a lower interest rate. The longer the term of the mortgage, the more interest you will pay over the life of the loan.
Types of Mortgages
Conventional/Fixed rate - usually 15 or 30 yrs. with a fixed interest rate); Adjustable Rate Mortgage; Balloon Mortgage (you pay smaller amounts through life of loan and then have a very big payment at the end.)
When a lender takes back an asset for non-payment on a loan/mortgage
the time for paying an account without any interest charge
Mandatory insurance that covers the owner of a car (the insurance follows the car - so if someone besides the owner is driving, the car is still insured)
Auto insurance coverage that covers property damage to other people's property (car, other property) as a result of an auto accident.
Covers doctor costs for injuries to others resulting from a car accident
Auto insurance coverage that covers damage to your own vehicle if involved in an auto accident