Credit vs. Debt
This is the ability to borrow money with the agreement to pay it back later.
What is credit
This type of borrowing lets you make everyday purchases up to a limit, paid back monthly.
What is a credit card
If you borrow $100 and have to pay back $110, what is the extra $10 called
What is interest
This is the smallest amount a borrower must pay each month to avoid penalties.
What is a minimum payment
You borrow $200 on a credit card at 15% interest for the year. How much interest do you owe?
This is money that is owed to a lender
This type of loan is used specifically to pay for college or trade school
What is a student loan
Interest rates are usually written using what symbol?
what is a percent sign (%)
Before agreeing to a loan, a responsible borrower should make sure they can afford this regular expense.
What is the monthly payment
You take out a $1,000 personal loan at 10% interest – you’re calculating a simplified version of the interest. What's the total repayment
What is $1,100
This is the bank or company that provides a loan
What is a Lender
This type of loan is used specifically to buy a car
What is an auto loan
If you borrow $1,000 at 10% interest for one year, this amount is a simplified version of how much you'd pay back in total.
What is $1,100?
This responsible borrowing habit helps you avoid late fees and keeps your debt from becoming harder to manage.
What is making on time payments
A $15,000 auto loan has a 6% interest rate. How much interest is charged?
What is $900
This is the person who receives money or credit and agrees to repay it.
What is a borrower
This type of loan gives you a lump sum for a specific need, repaid in fixed monthly payments.
True or False: The longer you take to pay off a loan, the less interest you pay overall.
False
Paying more than this each month reduces total interest paid over time
What is the minimum payment
An $8,000 student loan has a 5% interest rate. With a simplified calculation, what's the total repayment after one year
What is $8,400
Why can borrowing money make an item cost more than its original price
What type of loan is typically used to purchase a house?
A mortgage
Paying only the $20 minimum each month on a $500 credit card balance can lead to this result over time.
What is paying more in total because interest continues to build on the unpaid balance?
This can happen to your credit score if you borrow more than you can afford and miss payments
What is a lower credit score
A $15,000 auto loan at 6% interest will generally cost more in total interest than a $200 credit card balance at 15% interest, assuming similar repayment periods, mainly because of this.
What is the larger amount borrowed