Test 2

A long-term loan for a home

This is the money the bank or other lender is willing to lend to a person.

This is anything of value pledged by the borrower that the lender may sell or keep if the borrower does not repay the loan; something you have to promise to the bank if you don’t pay back your loan.

house, car title, and stocks are…

This is a document (or agreement) that states the terms and conditions of the loan.

Bankers sometimes grant loans without security, but they require the signature of one or more other persons, called _________ who guarantee the loan will be repaid

The money the borrower pays to use the lender’s money.

This is based on the entire amount of the loan for the total period of the loan, a specific type of interest.

Rate

The percentage of the loan that is paid in interest.

Each month has 30 days and a year has 12 months and 360 days.

Principle and Interest

Type of simple interest loan where the interest is paid at the time the borrower receives the loan

The interest charged in advance when using a discount note

A payment that is less than the full amount owed and made prior to the due date.

Interest accrued (built up) since the start of the loan or last partial payment must be paid before the payment can be used to lower the loan amount.

1

2

4

12

savings account, CDs (certificate of deposit), government bonds. Set interest rates.

Stocks, mutual funds, commercial bonds. Varying interest rates/returns

This type of interest is computed based on the previous balance in the account, including previous interest.

Loan on which you pay a specific monthly payment amount for a set number of payments

Mortgage, Auto, Student Loans

Loan on which there is no specific amount due each month, but a required minimum. Example: Credit Cards.

Open-End Installment Loan

Total amount of money (interest) the borrower must pay the lending institution (such as a bank or MasterCard); Fancy way to say interest with installment loans

Sum of amount borrowed AND down payment AND finance charge (points too if it is a mortgage)

APR, number of payments, Finance Charge per $100 of loan.

Used to find the amount of interest saved if you pay off an installment loan early (kinda the partial payment version of Fixed installment loans). Also used to find the total amount to pay the loan off

Always round up!

This balance is found by adding charges and subtracting payments from the starting/previous balance on a credit card.

With this method, the current balance is used to determine the interest for a credit card.

With this method, the balance used to determine interest on a credit card is found by averaging the balance on each day of the month. This is considered a fairer and more accurate way of calculating credit card interest.

Same thing as interest; can be calculated using either the unpaid/previous balance method, average daily balance method, or is calculated for a minimum payment in a different manner.

Min payment = interest (i=prt) + ~1% of the principle

Window of time where you aren’t charged interest on your principle, given you had no previous balance

i=prt. The p value changes depending on which of the three methods you are using.