Credit & Loans
What is credit?
The ability to borrow money and pay it back later.
What is a budget?
A plan for how to earn, spend, and save money.
What is a checking account used for?
Daily spending and paying bills.
What is interest?
Extra money paid for borrowing money.
You lose your job. What financial tool helps you survive?
An emergency fund or savings.
What does APR stand for?
Annual Percentage Rate.
What is the difference between a want and a need?
A need is necessary to live; a want is something extra.
What is a savings account?
A bank account used to save money and earn interest.
Which costs more over time: high interest or low interest?
High interest.
Your phone breaks unexpectedly. What type of expense is this?
An unexpected or variable expense.
What is collateral?
Something valuable used to secure a loan.
What does it mean to have a budget deficit?
Expenses are greater than income.
What is an overdraft?
Spending more money than is in your account.
What is the difference between simple and compound interest?
Simple interest is only on the original amount; compound interest grows on the original amount plus interest.
You spend more than you earn in a month. What is this called?
A deficit.
What happens if you only make the minimum payment on a credit card?
You pay more interest and it takes longer to pay off the debt.
Why is an emergency fund important?
It helps pay for unexpected expenses without going into debt.
What happens if you spend more than you have in your account?
You may be charged overdraft fees and owe the bank money.
Why does a longer loan usually cost more overall?
Interest is charged for a longer period of time.
What happens if you get into an accident without insurance?
You must pay all costs out of pocket.
Name one thing that can hurt your credit score.
Late payments, missed payments, high credit usage, or defaulting on a loan.
Name one example of a fixed expense.
Rent, car payment, insurance, or phone bill.
Why do banks charge fees?
To cover services, risks, and operating costs.
Why do lenders charge interest?
To make money and to cover the risk of lending.
Why is budgeting important before moving out on your own?
It helps you afford rent, bills, and necessities without debt.