Chapter 4 Vocab
1. Credit-the receiving of money either directly or indirectly to buy good and services
today with the promise to pay for them in the future
2. Principal-the amount originally borrowed.
3. Interest-the amount the borrower must pay for the use of someone else's money.
4. Installment debt-a type of loan that is repaid with equal payments over a period of
time.
5. Consumer Durables-manufactured items that people use for long periods of time
before replacing them.
6. Mortgage-an installment debt owed on reap property.
7. Commercial bank-bank offering a wide range of services; main functions are to accept
deposits, lend money, and transfer funds.
8. Saving and loan association-
9. Saving banks-depository institutions originally set up to serve small savers overlooked
by commercial banks.
10. Credit union-depository institution owned and operated by its members to provide
savings accounts and low-interest loans to its members only.
11. Finance company-company that takes over contracts for installment debts from stores
and adds a fee for collecting debt.
12. Consumer finance company-company that makes loans directly to consumer at high
rates of interest.
13. Charge account-credit extended to a consumer allowing the consumer to buy goods or
services from a particular company and to pay for them later.
14. Regular charge account-credit extended to a consumer allowing the consumer to buy
goods or services form a particular store and to pay for them later. Interest is charged on
that part of the account not paid within a certain period of time.
15. Credit limit-maximum amount of goods or services a person or business can buy on
the promise to pay in the future
16. Revolving charge account-credit extended to a consumer allowing the consumer to
buy goods or services form a particular store and to pay for them later. Usually a certain
portion of the balance must be paid each month; interest is charged on the amount not
paid
17. Installment charge account-credit extended to a consumer allowing the consumer to
buy major items such as furniture, televisions, and refrigerators from a particular store
and to pay for them in equal payments, or installments, spread over a period of time.
18. Credit card-credit device that allows a person to make purchases at many kinds of
stores, restaurants, hotels, and other businesses without paying cash.
19. Debit card-credit device used to make cashless purchases of goods and services;
money is electronically drawn from the consumer's checkable account the transferred
directly to the store's bank account.
20. Finance charge-cost of credit expressed in dollars and cents.
21. Annual percentage rate-cost of credit expressed as a yearly percentage rat.
22. Credit bureau-private business that investigates a person's income, current debts,
personal life and past history of borrowing and repaying debts to determine the risk
involved in lending money to that person.
23. Credit check-investigation of a person's income, current debts, personal life, and past
history of borrowing and repaying debts.
24. Credit rating-rating of the risk involved in lending money to a specific person or
business.
25. Collateral-something of value that a borrower lets the lender claim if a loan is not
repaid.
26. Secured loan-loan that is backed up by collateral.
27. Unsecured loan-loan guaranteed only by a promise to repay it.
28. Cosigner-person who signs a loan contract along with the borrower and promises to
repay the loan if the borrower does not.
29. Past-due notices-reminders set by businesses and lending institutions that debt
payments are overdue.
30. Usury law-law restricting the amount of interest that can be charged for credit.
31. Bankruptcy-the inability to pay debts based on the income received; a condition in
which debtors give up most of what they own for distribution to creditors.