Credit Vocabulary
all definitions from Consumer Education and Economics
Acceleration Clause: A provision in an installment loan contract that gives the seller the right to declare the whole balamce due if the buyer misses even one installment payment.
Add-on Clause: A loan contract provision that allows purchases to be added to an existing installment loan, with earlier purchases used as security for later ones.
APR: Annual percentage rate: the annual rate of interest that is charged for using credit.
Balloon Payment: A final loan payment than is much larger than the other installments.
Bankruptcy: Legal relief from repaying certain debts.
Closed-End Credit: A one-time extension of credit for a specific amount and time period.
Collateral: Property that is pledged to guarantee repayment of a loan.
Collection Agency: A business that collects unpaid debt for others.
Consumer Finance Companies: Business that specialize in making small or personal loans.
Cosigner: A person with a strong established credit history who signs a credit application and contract along with the borrower.
Credit: The supplying of money, goods, or services at present in exchange for promise of future payment.
Credit Bureau: A firm that collects information about the credit worthiness of consumers.
Credit Counseling: Guidance provided by trained people who help consumers learn to live without their means.
Credit History: A pattern of past behavior in regard to repaying debt.
Credit Limit: The maximum amount of credit that a creditor will extend to a borrower.
Credit Rating: An evaluation of a consumer's credit history.
Credit Report: A record of a particular;ar consumer's transactions and payment patterns.
Credit Score:A numerical rating, based on credit report information, that represents a person's level of credit worthiness.
Creditor: A business or organization that extends credit.
Debt Consolidation Loan: A loan that combines all existing debt into a new loan with a more manageable payment schedule.
Default: Failure to fulfill the obligations of a loan.
Delinquent: Overdue.
Down Payment: A portion of a purchase price paid by cash or check at the time of purchase, reducing the amount borrowed.
Finance Charge: The total cost of using credit, including interest and any fees.
Garnishment: The legal withholding of a specified sum from a person's wages in order to collect debt.
Grace Period: Period of time during which the balance on a credit card may be paid in full to avoid finance charges.
Installment: A set portion of a loan amount that the borrower must pay regularly schedule intervals.
Lien: A claim upon property to satisfy a debt.
Loan Sharks: Unlicensed lenders who operate outside the law.
Open-End Credit: Credit that can be used repeatedly. Sometimes referred to as line of credit.
Principal: Original amount borrowed.
Prepossession: Taking away property due to failure to make loan or credit payments.
Right of Rescission: The right, provided by the Truth in Lending Act, that gives borrowers up to three business days to cancel a loan or other credit transaction for which their home is pledged as security.
Secured Credit: Credit that is backed by a pledge of property.
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