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Credit and Loans Explorer - Coggle Diagram
Credit and Loans Explorer
Annual Percentage Rate (APR)
Definition: The annual rate charged for borrowing or earned through an investment, expressed as a single percentage that represents the actual yearly cost over the term of a loan.
Example: if you have a credit card with an APR of 20% and you owe $100, you would pay $200 in interest over the course of a year if the balance remains at $1000.
Bankruptcy
Example: A company facing insurmountable debt might file for chapter 7 bankruptcy, leading to the liquidation of its assets to pay off creditors.
Definition: A legal process through which individuals or business individuals or business that are unable to repay their debts can seek relief from some or all of their obligations.
Closed-End-Credit
Example: A car loan is a type of Close-End-Credit where the borrower pays back the interest in monthly installments over a set period.
Definition: A loan extension of credit where the funds are dispersed in full when the loan closes and must be paid back, including any interest and finance charges, by a specific date.
Credit Report
Definition: A detailed report of an individual's credit history prepared by a credit bureau. It includes the individuals credit account, loans, bill payment history, and public reports.
Example: Before approving a mortgage, a lender will review your credit report to asses your past payment behavior and current debt levels.
Credit Score
Example: A score of 720 or higher is generally considered excellent credit
Definition: a prediction of your credit behavior, such as how likely you are to pay a loan back on time, such as information from your credit reports.
Creditor
Definition: Individuals or entities that have lent money to another individual or entities.
Example: A bank lending money to a person to purchase a house.
Debtor
Definition: A company or individual who own money.
Example: If your take out a car loan out your credit unit.
Installment loan
Definition: Allow you to borrow money and pay it back in equal monthly payments.
Example: Personal loans, auto loans, mortgages and students loan.
Open-End Credit
Definition: A loan from a bank or other financial institution that the borrower can draw on repeatedly up to a certain pre-approved amount
Example: Credit cards account, home equity lines of credit, and debt cards.
Secured Loan
Definition: Loans that are secured by a specific form of collateral
Example: Mortgages, home equity loans and auto loans.
Unsecured Loan
Definition: Debt products that do not require collateral but may come with higher interest
Example: Students Loans, Personal loans and credit loans