Personal Finance: Credit Basics

A line of credit established in advance so the borrower does not have to apply for credit each time new credit is desired.

• Rent‐to‐own loan

• Pawn loan

• Open‐end credit

• Refund anticipation loan

A loan which the borrower must repay the amount in a specified number of equal payments.

• Title loan

• Payday loan

• Closed‐end credit

• Refund anticipation loan

Short‐term loan that provides immediate cash by securing a borrower’s written check or receiving authorization for automatic withdrawal from the borrower’s depository institution account.

• Title loan

• Payday loan

• Closed‐end credit

• Refund anticipation loan

Tangible items leased with the condition that the item will be owned by the renter if the term of rent (contract) is completed.

• Rent‐to‐own loan

• Pawn loan

• Open‐end credit

• Refund anticipation loan

A loan based on the value of personal property.

• Rent‐to‐own loan

• Pawn loan

• Open‐end credit

• Refund anticipation loan

The borrower gives the lender his/her automobile title in exchange for a set amount of cash.

• Title loan

• Payday loan

• Closed‐end credit

• Refund anticipation loan

Short‐term cash advance secured by a taxpayer’s expected tax refund.

• Title loan

• Payday loan

• Closed‐end credit

• Refund anticipation loan

Annual interest rates for alternative loans can be as high as 300%.

• True

• False

All lenders check a person’s credit report and score during the loan approval process.

• True

• False

The terms of a loan are always consistent for the length of the loan.

• True

• False