Credit Basics Vocab

Principal

• The amount of the loan.
• The cost of using someone else’s money.

Collateral

• Offering of property that you own in order to secure a loan.
• What a business will often consider when making a loan – Character, Capacity, Capital.

Co-Signer

• Someone with good credit and property that signs on your behalf in order for you to secure a loan.
• What a business will often consider when making a loan – Character, Capacity, Capital.

Credit

• A privilege of using someone else’s money for a period of time.
• a thing that is borrowed, especially a sum of money that is expected to be paid back with interest.

Debtor

• Anyone who buys on credit or receives a loan.
• Anyone who sells credit or makes a loan.

Creditor

• Anyone who sells credit or makes a loan.
• Anyone who buys on credit or receives a loan.

Three C’s of Credit

• What a business will often consider when making a loan – Character, Capacity, Capital.
• Offering of property that you own in order to secure a loan.

Loan

• a thing that is borrowed, especially a sum of money that is expected to be paid back with interest.
• A privilege of using someone else’s money for a period of time.

Fixed Interest Rate

• The interest rate will stay the same over the life of the loan.
• The interest can change (vary) over the life of the loan.

Variable Interest Rate

• The interest can change (vary) over the life of the loan.
• The interest rate will stay the same over the life of the loan.