What Is Credit?
After reading Lesson 11: What is Credit?, have students complete this study set to check for understanding.
Terms in this set (8)
What is credit?
Buying a good or service now and paying for it later.
How do you obtain credit?
To obtain credit, a prospective borrower must convince someone else (a lender) to provide a loan in return for the borrower's promise to pay the money back, plus an additional charge called interest.
What do people get loans for?
People obtain loans to buy cars, homes, and major appliances, to improve their homes, to pay for college education, and so forth.
What are assets?
Credit can help people acquire assets. Assets are goods or services that usually retain or increase their value. Ordinarily, a home or post-secondary education is considered an asset.
What is interest?
Interest is the price a borrower pays to a lender for use of the credit provided by the lender. Interest is the reward lenders receive for allowing others to use their funds.
How do both sides benefit when using credit?
Borrowers are able to purchase something that may be of value to them today and/or in the future. Lenders are repaid the money that they lent, plus interest.
What is the difference between higher and lower risk loans?
Higher- risk loans—loans where it is uncertain that the borrower can repay—usually result in higher interest rates. Lower-risk loans—loans where it seems evident that the borrower can repay—usually result in lower interest rates.
What is a secured loan?
Secured loans (those that are backed by other assets, like your home or your car), are likely to have lower interest rates than unsecured loans (those that are not backed by other assets).
OTHER SETS BY THIS CREATOR
8.2 Budgets are Beautiful
9.2 Financial Services
Paying For Postsecondary Education
Coming and Going - Imports and Exports Throughout the World