#1
What is a 'Prepayment Penalty' in the context of loans?
A fee charged for paying off a loan early.
ExplanationPrepayment Penalty is a charge for repaying a loan before the agreed-upon time.
#2
What is the 'Minimum Payment' on a credit card statement?
The smallest amount that must be paid to avoid late fees and penalties.
ExplanationMinimum Payment is the smallest sum required to prevent late fees on a credit card.
#3
What does 'Default' mean in the context of a loan?
Failure to repay a loan according to the agreed-upon terms.
ExplanationDefault refers to failing to repay a loan as per the agreed-upon terms.
#4
What is 'Bankruptcy'?
A legal status indicating inability to repay debts.
ExplanationBankruptcy is a legal status signifying the inability to meet financial obligations and repay debts.
#5
What is the 'Credit Card Grace Period'?
The time period during which no interest is charged on new purchases.
ExplanationCredit Card Grace Period is the time when no interest is levied on new purchases.
#6
What is the Annual Percentage Rate (APR) on a loan?
The total cost of the loan, including interest and fees, expressed as a percentage.
ExplanationAPR represents the overall cost of borrowing, incorporating both interest and fees.
#7
What does 'Grace Period' mean in the context of credit cards?
The period after the due date during which the borrower can still make a payment without penalty.
ExplanationGrace period allows making credit card payments after the due date without incurring penalties.
#8
What does the term 'Collateral' mean in the context of a loan?
An item of value that is used as security for the loan.
ExplanationCollateral is valuable property securing the loan and mitigating the lender's risk.
#9
What does 'Loan Term' refer to?
The duration over which a loan is repaid.
ExplanationLoan Term denotes the period for the repayment of a loan.
#10
What is the 'Credit Limit' on a credit card?
The maximum amount that can be borrowed on the credit card.
ExplanationCredit Limit is the highest amount available for borrowing on a credit card.
#11
What is a 'Credit Score' used for?
To assess the borrower's ability to repay a loan.
ExplanationCredit score evaluates the borrower's repayment capability for loans.
#12
What is the difference between 'Fixed Interest Rate' and 'Variable Interest Rate' on a loan?
Fixed Interest Rate remains the same throughout the loan term, while Variable Interest Rate can change.
ExplanationFixed Interest Rate is constant, whereas Variable Interest Rate may fluctuate during the loan period.
#13
What is 'Credit Utilization Ratio'?
The ratio of credit card balances to credit limits.
ExplanationCredit Utilization Ratio is the proportion of credit card balances to the total credit limit.
#14
What is 'Compound Interest'?
Interest calculated on both the initial loan amount and the accumulated interest.
ExplanationCompound Interest is calculated on the principal and previously accrued interest.
#15
What is 'Debt-to-Income Ratio'?
The ratio of income to debt in a credit application.
ExplanationDebt-to-Income Ratio assesses the proportion of income dedicated to debt repayment in a credit application.