Unit 3: Personal Finance: Part 2 Vocabulary

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Annual Percentage Rate (APR)

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The annual rate charged for borrowing or earned through an investment, expressed as a percentage.

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Amortization

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The process of gradually paying off a debt over time through regular payments.

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Simple Interest

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Interest calculated only on the initial amount of money, or principal, that was deposited or loaned.

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Compound Interest

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Interest calculated on the initial principal, which also includes all of the accumulated interest from previous periods.

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Fixed Interest

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An interest rate that does not change over the life of a loan or investment.

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Variable Interest

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An interest rate that can change over time, based on an underlying benchmark or index.

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Banks

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Financial institutions licensed to receive deposits and make loans.

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Credit Unions

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Member-owned financial cooperatives that provide traditional banking services.

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Payday Lenders

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Companies that offer small, short-term loans at high interest rates, typically due on the borrower's next payday.

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Title Pawn Lenders

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Lenders that offer loans secured by the borrower's vehicle title.