Types of Credit Vocabulary

An Adjustable-Rate Mortgage (ARM) is defined as a mortgage with a variable interest rate that adjusts over time based on market conditions.

• A type of mortgage with a variable interest rate that adjusts over time based on market conditions.

• A mortgage with a fixed interest rate over the life of the loan.

• A mortgage that requires only interest payments for the first few years.

• A type of mortgage exclusively offered for short-term loans.

Amortization is the process of gradually repaying a debt, with periodic payments of principal and interest.

• It is the process of gradually repaying a debt with periodic payments of principal and interest.

• It is the process of investing money for rapid growth.

• It is a method of calculating profits in a business.

• It is an accounting error adjustment process.

Annual Fee is the yearly charge imposed by a financial institution for a credit card or similar service.

• A yearly fee

• A monthly fee

• A one-time fee

• No fee

Annual Percentage Rate (APR) represents the annual cost of borrowing, including any fees and additional costs.

• It represents the annual cost of borrowing, including fees and additional costs.

• It is the monthly interest rate multiplied by 12.

• It is the annual return on investment from a bank account.

• It only considers the interest rate without any fees.

An Authorized User is an individual allowed to use an account without being liable for its debt.

• An individual allowed to use an account without being liable for its debt

• The primary account holder who is solely responsible for the account

• A bank official in charge of verifying account details

• A family member automatically included on the account

A Balance Transfer is:

• The process of transferring outstanding credit card debt from one account to another to take advantage of lower interest rates.

• A method to deposit money from one bank account to another.

• A type of loan provided by banks to customers.

• An automatic payment plan for settling credit card bills.

Cash Advance is a short-term borrowing facility that allows you to withdraw funds against your credit line.

• A short-term borrowing facility against your credit line.

• A long-term personal loan.

• A fee charged for delayed credit card payments.

• An overdraft service for checking accounts.

A Charge Card is a payment instrument that requires the balance to be paid in full each month.

• It is a payment card that requires the balance to be paid in full each month.

• It is a credit card with revolving credit.

• It is a debit card that withdraws funds immediately.

• It is a prepaid card with a fixed spending limit.

Collateral is defined as an asset pledged as security for a liability.

• An asset pledged as security for a liability

• A type of secured loan

• An unsecured asset

• A financial liability

A Consolidation Loan is a loan that combines multiple debts into one payment.

• It is a loan that combines multiple debts into one payment.

• It is a loan that consolidates real estate properties.

• It is a loan designed to merge business accounts.

• It is a loan that is only used for credit card debts.