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Finance Flashcards

Personal Finance: Chapter 5

annual percentage rate (APR) The percentage cost (or relative cost) of credit on a yearly basis. The APR yields a true rate of interest for comparisons with other sources of credit.
capacity The borrower’s financial ability to meet credit obligations.
capital The borrower’s assets or net worth.
character The borrower’s attitude toward his or her credit obligations.
closed-end credit Onetime loans that the borrower pays back in a specified period of time and in payments of equal amounts.
collateral A valuable asset that is pledged to ensure loan payments.
conditions The general economic conditions that can affect a borrower’s ability to repay a loan.
consumer credit The use of credit for personal needs (except a home mortgage).
credit An arrangement to receive cash, goods, or services now and pay for them in the future.
Fair Credit Billing Act (FCBA) Sets procedures for promptly correcting billing mistakes, refusing to make credit card payments on defective goods, and promptly crediting payments.
finance charge The total dollar amount paid to use credit.
interest A periodic charge for the use of credit.
line of credit The dollar amount, which may or may not be borrowed, that a lender makes available to a borrower.
open-end credit A line of credit in which loans are made on a continuous basis and the borrower is billed periodically for at least partial payment.
revolving check credit A prearranged loan from a bank for a specified amount; also called a bank line of credit.
simple interest Interest computed on principal only and without compounding.

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