BORROWING BASICS
What is a loan?
Money you borrow now and pay back later.
What is the difference between a debit card and a credit card?
Debit uses your own bank money; credit borrows money.
What is a credit score?
A number showing how responsible you are with borrowed money.
What word means “money you still owe”?
Balance
Carlos pays his bill on time every month. How does this help him?
Builds good credit history and credit score.
What is interest?
A fee charged for borrowing money.
What is the minimum payment?
The smallest amount you must pay on your credit card bill.
Why is a high credit score important?
It helps you qualify for loans and lower interest rates.
What is a co-signer?
Someone who agrees to repay a loan if the borrower cannot.
Emma checks her credit score before applying for a loan. Why?
To see if she’s likely to qualify.
What is one pro of borrowing money from family or friends?
Lower/no interest OR flexible repayment.
Why is paying only the minimum payment risky?
Interest keeps building and debt grows.
What is credit history?
A record of how you’ve handled borrowing and repayment.
What is an authorized user?
Someone allowed to use another person’s credit card account.
Devon becomes an authorized user on his sister’s card. What can this help him do?
Start building credit history.
What is one con of borrowing money from family or friends?
It can damage relationships if not repaid.
Name TWO ways to use a credit card responsibly.
Pay on time, pay in full, stay within budget, avoid maxing out card.
Name one factor that impacts your credit score.
Payment history, credit utilization, length of history, new credit, or credit mix.
What is a credit card statement?
A monthly summary of charges, payments, and balance.
Jamal buys groceries with a debit card. Where does the money come from?
His bank account.
What are the 3 parts of a loan?
Principal, interest rate, and term.
What is a secured credit card?
A credit card backed by money you deposit first.
What is credit utilization rate?
The percentage of available credit you are using.
What is a repayment plan?
A schedule for paying back borrowed money.
A person with a higher credit score usually gets what kind of interest rate?
Lower interest rate.