POST-ASSESSMENT

FINANCIAL LITERACY KEY TERMS

Loan

Money, property or other material goods given to another party in exchange for future repayment of the loan value or principal amount, along with interest or finance charges. Examples: Mortgage, car loan, home renovation, starting a business

Debt

An amount of money borrowed by one party from another. Debt is used by many corporations and individuals as a method of making large purchases that they could not afford under normal circumstances.

Mortgage

A type of loan you can use to buy or refinance a home. Mortgages are also referred to as “mortgage loans.”

Mortgages are a way to buy a home without having all the cash upfront. When you get a mortgage, your lender gives you a set amount of money to buy the home. You agree to pay back your loan – with interest – over a period of several years. You don’t fully own the home until the mortgage is fully paid off.

It’s important to note that the period of years you have to pay back your mortgage will affect your monthly payment and how much interest you will pay in total. For example, a 15-year mortgage will have a higher monthly payment than a 30-year mortgage, but with a 15-year mortgage you will pay less interest since you are paying off your loan in a shorter amount of time.