Vocabulary
1. The process of paying off a debt in regular installments over a period of time is known as
amortization
6. When buying a new car, Michael was required to pay 20% of the car’s price upfront as a(n) ________ , reducing the amount he needed to borrow.
down payment
9a. an auto loan is what type of credit (installment/revolving)
installment
9f. a credit card is what type of credit (installment/revolving)
13a. having a large down payment would (increase/decrease) your monthly auto payment
decrease
2. The smallest amount you can pay each month to keep your credit card in good standing is called the
minimum payment
7. the amount of money you borrow from a lender
principal
9b. a student loan is what type of credit (secured/unsecured)
unsecured
10. It’s important for young people to start building a credit history and have a credit score. What are some ways people under the age of 21 can do so?
Get a cosigner (parent, guardian, etc.) so you can open up a credit card account
Start paying off the interest on student loans while you’re in school to bump up your credit score
Get a secured credit card
Become an authorized user on a parent or guardian’s credit card account
13b. having a long term would (increase/decrease) your monthly auto payment
decrease
3. Amanda has taken out a(n) ___________, which has an interest rate that changes based on the market. As a result, her monthly payments may change
variable-rate loan
7. the amount you are charged to borrow money
interest
9c. a personal loan has what type of interest (fixed/variable)
11. If you have a loan with a longer term, you are more likely going to have (lower / higher) monthly payments and pay (less / more) in total interest.
lower monthly payments
more total interest
13c. having a low credit score would (increase/decrease) your monthly auto payment
increase
4. Jenny’s mother added her as a(n) _________ on her credit card account so Jenny could build a credit history under supervision
authorized user
7. how long you have to pay the money back, with interest, to the lender
term
9d. a mortgage is what type of credit (secured/unsecured)
secured
12. Explain how an amortized loan works and why it’s a good idea to pay MORE than the amortized payment on a loan if you are able.
With an amortized loan, your monthly payments are the same. Over time however, the amount of your payment that goes towards paying off interest decreases while the amount of your payment that goes towards paying off the principal balance increases.
It’s a good idea to pay more than the monthly payment because:
The total cost of the loan will be less
You will pay less in total interest
You will pay your loan off faster
13d. having a loan with a high APR would (increase/decrease) your monthly auto payment
increase
5. A car loan is an example of _________ , where the loan is backed by collateral. If payments are not made, the lender can seize the car itself
secured debt
8. The maximum amount of money that can be charged to a credit card is known as the
credit limit
9e. an adjustable-rate mortgage has which type of interest (fixed/variable)
variable