Financial Literacy Review PDF

Financial literacy review Vocabulary: 1. Credit: Borrowed money that must be repaid, usually with interest. 2. Debt: Money owed to a lender or creditor 3. Loan: a sum of money borrowed that is expected to be paid back with interest. 4. Good Debt: Borrowing for something useful, like college or...

Financial literacy review Vocabulary: 1. Credit: Borrowed money that must be repaid, usually with interest. 2. Debt: Money owed to a lender or creditor 3. Loan: a sum of money borrowed that is expected to be paid back with interest. 4. Good Debt: Borrowing for something useful, like college or a house ( asset) 5. Bad Debt: Borrowing for things ( non essential items )you don’t need or that lose value. 6. Consumer Debt: Debt for personal stuff, like shopping or vacations. 7. Total Debt: All the money you owe combined. 8. Debt Ratio: How much debt you have compared to how much money you make. 9. Secure: Loans backed by something valuable (like your car). 10. Unsecured: Loans not backed by anything (like credit cards). 11. Collateral: Something valuable you promise to give if you don’t pay back. 12. Co-signer: Someone who promises to pay if you can’t. 13. Variable Rate: Interest rate that changes over time. 14. Fixed Rate: Interest rate that stays the same. 15. Consumer Loan: Borrowing money for personal stuff like a car or a trip. 16. Revolving Credit: Credit that can be repeatedly used up to a limit (e.g., credit cards). 17. Mortgage: a loan specifically for purchasing a property 18. Amortization Period: How long it takes to pay off a loan. 19. Credit Report: A report showing your borrowing history. 20. Credit Score: A number that shows how good you are at paying back money. 21. Consumer Proposal: A deal with creditors to pay back less than you owe. 22. Bankruptcy: Legal process to relieve a person of their debts due to inability to pay. Questions: 1. Good vs. Bad Debt: Good debt is for stuff that helps your future (like school). Bad debt is for things you don’t really need. 2. Benefits and Pitfalls of Credit: Good: Helps build a credit score, useful in emergencies. Bad: You could owe more money because of interest. 3. Credit Agencies in Canada: Equifax and TransUnion. 4. 5 C’s of Credit: Character, Capacity (how much you can pay), Capital (money you have), Collateral, Conditions. 5. Big Down Payment Benefits: Smaller loan, less interest, better deal. 6. What is a Credit Score Used For? To see if you’re good at paying back money. 7. Co-Signer Risks: If the main person doesn’t pay, you have to. 8. Are Credit Cards Good or Bad? Good if you use them wisely, bad if you overspend and can’t pay. 9. Typical Credit Card Interest Rate: Around 18–20%. 10. Fixed vs. Variable Mortgage: Fixed stays the same; variable can change and save or cost you more. 11. Why Pick a 25-Year Mortgage? Smaller monthly payments, but you pay more interest in the long run. 12. Mortgage Pre-Approval: A check to see how much a bank can lend you for a house. 13. CMHC Insurance: Needed if your down payment is less than 20%. 14. High vs. Low Credit Score: High = good deals, easy to borrow. Low = harder to borrow, bad deals. 15. Credit Score Range: 300 (bad) to 900 (amazing). 16. How to Boost Credit Score: Pay on time, don’t use too much credit, check your credit report. 17. How to Hurt Credit Score: Late payments, borrowing too much, missing payments. 18. Bad Stuff on Credit Reports: Late payments, collections, bankruptcy. 19. Scholarship vs. Bursary: Scholarship = for being good at something. Bursary = for needing money. 20. Grant: Free money for school. 21. Why Government Student Loans Are Good: Low interest, flexible payments. 22. Why Banks Charge More Interest to Some People: If they think you won’t pay it back, they charge more. 23. 9 Steps to Repay Debt: 1. Know what you owe. 2. Budget. 3. List your debts. 4. Pay minimums first. 5. Pick a repayment plan (snowball or avalanche). 6. Talk to lenders. 7. Make more money. 8. Combine debts. 9. Get advice.