Credit and Borrowing — What credit is and the deal between borrowers and lenders.
Credit is simply borrowing money now and repaying it later. The whole system runs on trust that you will pay back what you owe.
Principal vs interest: Principal is the amount you borrow. Interest is the extra the lender charges for the privilege of borrowing it.
A secured loan is backed by collateral the lender can seize if you stop paying, like a car or house. An unsecured loan has none, so it usually carries a higher rate to offset the lender's risk.
Default: Failing to make payments as agreed. It badly damages your credit and can send the debt to collections.
A co-signer promises to repay if you cannot. It can help you qualify, but it puts their credit on the line too.
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