Sec. 1 Vocab
Credit
bank whose main functions are to accept deposits, lend and transfer funds, checking and savings accounts, control the largest amount of funds
Commercial Bank
used by local, state, federal governments and Americans
Credit
Anytime you borrow money you are going into ___.
debt
Would be the first place you would go for a loan?
Commercial Bank
the amount originally borrowed in a loan
Principal
depository institution owned and operated by its members to provide savings accounts and loans to only its members
Credit Union
_________ = Principal + Interest
Debt
People want an item now rather than later, People can spread out payments over the item's service life, People can enjoy the item while you pay rather than saving
Why People Use Credit/Advantages of Credit
Financial Institutions borrow funds at one interest rate and lend it at a _____________ interest rate.
higher
the amount the borrower must pay for the use of someone else's funds (bank)
Interest
financial institution that takes over contracts for installment debts from stores and adds a fee for collecting the debt and gives you a higher interest rate
Finance Companies
Vehicles, Refrigerators, Washer/Dryer
Durable Goods
Going into debt, Must pay interest, lost opportunities to buy other goods, may lead to overspending
Disadvantages of Credit
Allows a person to make purchases at many kinds of businesses without using cash
Credit Cards
type of loan repaid with equal payments over a period of time
Installment Debt
Allows a customer to buy goods or services from a particular company and pay for them later
Charge Accounts
Common type of debt that most people do not actually consider a debt?
Mortgage
Fancy word for Bank
Financial Institution
The longer repayment period has _________ payments but _____________ over time.
smaller payments, higher interest
installment debt owed on real property-houses, buildings, or land
Mortgage
The cost of credit expressed monthly in dollars and cents.
Finance Charges
The amount of time you have to pay off your loan
Installment Period
What should you do before you take out a loan?
Comparison Shop, find the best interest rate
The shorter repayment period has _______ payments but ______ over time.
larger payments, lower interest