Types of Credit Exam With Complete Solutions Latest Update
Credit - ANSWER Any scheme in which you receive "stuff" (money, goods, services),
and promise to pay for it over some time period in the future
Loan - ANSWER A deal in which you are credited with a fixed quantity (typically of
money) for a fixed period of time, often with interest
Interest Rate - ANSWER The percent charged for the right to borrow money
Principal - ANSWER The amount that you borrow
Term - ANSWER The amount of time you have to repay your principal
Collateral - ANSWER Something of value that the lender can take instead of getting paid
if you cannot repay your loan - such as a house or car
Co-signer - ANSWER Anyone who signs a credit agreement and agrees to repay the
debt if the borrower doesn't pay
Installment loan - ANSWER Loan used to finance a specific purchase for a specific
amount of time; regular payments pay the interest and portion of the principal
Revolving credit - ANSWER Open line of credit that can be used for any purchases as
long as you're under the limit; payments vary monthly based on size of the debt
Secured debt- ANSWER Debt that is attached to a particular tangible asset which can
be used as collateral and taken away if payments are no tmade
, Unsecured debt - ANSWER Debt NOT attached to a particular asset or which is not able
to be repossession if payments are made
Variable-rate loan - ANSWER Interest rate is subject to change, linked to prime rate or
an index rate, throughout the life of the loan
Fixed-rate loan - ANS Interest rate is pre-determined before loan is granted and remains
constant as long as ontime payments are being made
Amortization - ANS Paying off debt with a fixed repayment schedule in regular
installments over time period
Credit Union ANSWER A member-owned financial co-operative. Like banks, these are
established and controlled by its members and any net surplus is distributed to the
owners.
Micro Credits ANSWER A very small loan granted to very poor peoples for the purpose
of self employment.
Debit Card ANSWER A card used to pay for a purchase by drawing funds directly from a
consumer's checking account.
Unlike credit cards, they do not allow the user to go into debt, except perhaps for small
negative balances that might be incurred if the account holder has signed up for
overdraft coverage.
Credit Card - ANSWER A card issued by a financial company giving the holder an option
to borrow funds. Credit cards charge interest and are primarily used for short-term
financing. Interest usually begins one month after a purchase is made and borrowing
limits are pre-set according to the individual's credit rating.
Schumer Box - ANSWER A table that appears in credit card agreements that discloses
some of the basic information about rates and fees of the card.
Credit - ANSWER Any scheme in which you receive "stuff" (money, goods, services),
and promise to pay for it over some time period in the future
Loan - ANSWER A deal in which you are credited with a fixed quantity (typically of
money) for a fixed period of time, often with interest
Interest Rate - ANSWER The percent charged for the right to borrow money
Principal - ANSWER The amount that you borrow
Term - ANSWER The amount of time you have to repay your principal
Collateral - ANSWER Something of value that the lender can take instead of getting paid
if you cannot repay your loan - such as a house or car
Co-signer - ANSWER Anyone who signs a credit agreement and agrees to repay the
debt if the borrower doesn't pay
Installment loan - ANSWER Loan used to finance a specific purchase for a specific
amount of time; regular payments pay the interest and portion of the principal
Revolving credit - ANSWER Open line of credit that can be used for any purchases as
long as you're under the limit; payments vary monthly based on size of the debt
Secured debt- ANSWER Debt that is attached to a particular tangible asset which can
be used as collateral and taken away if payments are no tmade
, Unsecured debt - ANSWER Debt NOT attached to a particular asset or which is not able
to be repossession if payments are made
Variable-rate loan - ANSWER Interest rate is subject to change, linked to prime rate or
an index rate, throughout the life of the loan
Fixed-rate loan - ANS Interest rate is pre-determined before loan is granted and remains
constant as long as ontime payments are being made
Amortization - ANS Paying off debt with a fixed repayment schedule in regular
installments over time period
Credit Union ANSWER A member-owned financial co-operative. Like banks, these are
established and controlled by its members and any net surplus is distributed to the
owners.
Micro Credits ANSWER A very small loan granted to very poor peoples for the purpose
of self employment.
Debit Card ANSWER A card used to pay for a purchase by drawing funds directly from a
consumer's checking account.
Unlike credit cards, they do not allow the user to go into debt, except perhaps for small
negative balances that might be incurred if the account holder has signed up for
overdraft coverage.
Credit Card - ANSWER A card issued by a financial company giving the holder an option
to borrow funds. Credit cards charge interest and are primarily used for short-term
financing. Interest usually begins one month after a purchase is made and borrowing
limits are pre-set according to the individual's credit rating.
Schumer Box - ANSWER A table that appears in credit card agreements that discloses
some of the basic information about rates and fees of the card.
