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Terms to Know: Banking

  • Mortgage: a note used to secure a loan for property, like a house

  • Annual Percentage Rate (APR): yearly interest rate charged on borrowed money

  • Default: occurs when you’re unable to pay your debt/loan payments

  • Principal: amount of money due on a loan before interest

  • Time Value of Money: the longer money is invested, the longer is has to grow/appreciate

  • Money now is typically worth more than in the future due to inflation

  • Inflation: decrease in the value of money; increase in prices

  • Savings Account: federally insured accounts that typically pay the lowest rates of interest (compared to other government insured products)

  • Checking Account: allows for withdrawals and deposits by checks, automated teller machines (ATM), and electronic debits; some pay interest

  • Adjustable-Rate Mortgage (ARM): starts with a below-average interest rate but can rise as the market changes (not a set rate)

  • Amortization: paying off debt with monthly principal payments and interest

  • Check Bounces: occurs when the person writing the check doesn’t have enough money in their account to cover the written amount

  • Outstanding Check: when a check has been written but not cashed yet

  • Collateral: assets that are offered to secure a loan or other credit, and if you fail to meet payments on the loan, the collateral will be taken/seized; examples include your house or car

  • Interest: the cost of using money, a right, share, or title in property

  • Interest Rate: the amount paid by a borrower to a lender in exchange for the use of the lender’s money for a certain period of time

  • For example, you borrow $100 from the bank and the annual interest rate is 7%. After a year, you’ll have to pay the bank $107.

  • Federal Reserve System (the Fed): the central bank of the United States; regulates the U.S. monetary and financial system

  • Statement: a summary of all transactions that occurred over the preceding month; some banks/credit card companies mail the statement while others give online access

  • Loan Forgiveness: releases you from the obligation to pay back part of your federal debt

  • Deferment: postponing something, like a monthly payment, to another day

  • Unemployment: occurs when someone actively seeking work is unable to find any

Want to learn more? Here are some helpful Quizlets:

Sources include: NAIC, OppLoans, HelpWithMyBank, BetterMoneyHabits

Thumbnail photo by Expect Best via Pexels

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