Credit and Debt
Complete each sentence by typing the correct word in the space provided.
credit credit bureau credit rating
collateral finance charges annual percentage rate Truth in Lending laws
1. If you use your car as _collateral___ (property used to secure a loan), and you do not pay the loan back, the creditor has the right to repossess your car.
2. When a bank extends you _credit___, it allows you to borrow money and pay it back later with interest.
3. The _truth in lending laws___ require lenders to disclose the monthly interest rates and the method they use to calculate finance charges.
4. The kind of organization that maintains a record of your past borrowing and bill-paying habits is a _credit bureau___.
5. Creditors use your ability to repay debt and your history of borrowing and repayment to give you a _credit rating which is their evaluation of your credit worthiness.
6. When you pay your credit-card bills, you pay back not only the principal but also interest and fees, which together are called _annual percentage rate___.
Paying Off Debt
You have a $3,000 balance on a credit card with an 18% APR, now you suddenly come into a $3,000 windfall. Should you payoff your debt or invest in the booming stock market? Examine the following chart, then answer the questions that follow.
| |Stocks at 12% per year |Credit card at 18% per year | |At Launch |$3,000 |$3,000 | |Year 1 |$3,360 |$3,540 | |Year 5 |$5,287...