Amortize: Paying off regular installments over the length of a loan.
APR (annual percentage rate, interest rate): The rate charged each year to a consumer borrowing a finance company’s money. This is usually expressed as a percentage — ex. An interest rate of 5% will cost you $50 for every $1000 borrowed.
Asset: Anything of cash value owned by an individual. Examples include property, goods, savings or investments.
Average Daily Balance: A method used to calculate finance charges by adding the outstanding balance on each day in the billing period, and dividing that total by the number of days in the billing period. Also included in the calculation are new purchases and payments.
Bad Credit: A poor credit rating. This may have been caused by making late payments, skipping payments, exceeding credit card limits or declaring bankruptcy. Usually results in being denied credit.
Balance: The total amount of money owed. It includes any unpaid balance from the previous month, new purchases, cash advances, and any charges such as an annual fee, late fee or interest.
Balance Transfer: Moving a balance from one credit card to another. The usual reason is to shift an ongoing debt to an account with a lower interest rate.
Bankruptcy: To declare, legally, the inability to repay debts. A last resort, as it will have a severe impact on a credit rating and will remain on a credit report for ten years. Not a solution in all cases; federal student loans, federal tax debt and child support are all exempt from bankruptcy protection.
Beacon Score: Used to determine if one is credit worthy. Negative entries, such as late payments, will decrease your score; a positive, timely payment history on your accounts will increase your score.
Borrower (applicant): The person or group applying for a loan.
Cash advance loan (payday loan): A cash advance loan is a short term loan where a borrower gets cash advanced based on his paycheck. These loans generally up are up $1500 and must be repaid on the next payday.
Checking Account: The borrower’s account with a banking institution. Lenders normally require direct deposit on this account to be able to wire the cash directly into the account.
Closed-end Credit: A loan or credit agreement in which the amounts advanced, plus any finance charges, must be repaid in full over a definite time. This is how most real estate and automobile loans are agreed upon.
Collateral (security): Property offered to secure a loan or other credit, which may be seized in case of default.
Cosigner: A person who helps a borrower sign for a loan and assumes equal liability for it.
Credit: To buy or borrow in the present with the promise to pay back in the future. To postpone a payment of debt.
Credit Check: To review information on the borrower’s capability to abide to their financial responsibilities. Not required by most payday loan lenders.
Credit Score: A record of an individual’s past and present liabilities and documentation of the regularity of payments made on these liabilities. A three digit number, typically between 300 and 850, that determines the borrower’s credit history and their ability to repay debts in a timely manner.
Creditworthiness: The measure of a consumer’s past and future ability to repay debts.
Credit History: A record that shows how a person has borrowed and repaid debts.
Debt service: The total payments due on a borrower’s loans, plus interest.
Default: A borrower’s failure to meet their financial obligations.
Depreciation: The value an asset loses due to wear and tear or time.
Direct Deposit: Refers to the process of transferring funds into your account electronically.
Discharge: A legal terms meaning a court has erased your debts.
Equity: The value of the borrower’s property minus their loan amount.
Fee: A fee charged against the amount borrowed; the higher the amount the higher the fee.
Fixed Rate: Used to determine the finance charge payable on an extension of credit. A predetermined and certain rate of interest is applied to the principal.
Interest: The amount charged by the finance company to borrow money.
Lender: A company, agent, organization or individual that advances the funds to make a loan to a borrower or debtor.
Liabilities: Money owed by the borrower.
Lien: A legal claim on a piece of property until the debt or obligation is satisfied.
Liened Property: Property that has an outstanding loan obligation. The Certificate of Title for the property lists the borrower as the registered owner and the lender as the lien holder.
Lien-Free: Owned outright by the borrower. There is no outstanding loan obligation on a lien-free property.
Loan-to-Value Ratio: The difference between the amount of the loan and the appraised value of the property, expressed as a percentage.
Maturity Date: The scheduled date when the final payment amount of a loan becomes due and payable.
Monthly Payment: The principal and interest paid on a monthly basis over the life of the loan.
Negative Equity: When the amount a borrower owes on a property is larger than what the property is worth.
Net Worth: A borrower’s assets minus their liabilities.
Open-end Credit (charge account, revolving credit): A line of credit that may be used repeatedly up to a certain limit.
Open-end Lease (finance lease): A lease that may involve a balloon payment based on the value of the property when it is returned.
Overdraft Checking Account: A checking account that allows a person to write checks for more than the actual balance in the account, with a finance charge on the overdraft.
Payday Loan (cash advance): A payday loan is a cash loan taken out based on an expected paycheck that will cover the loan amount and the fees acquired with it.
Paycheck: A weekly, bi-weekly, or monthly salary that a borrower obtains from their employers.
Points: Finance charges paid by the borrower at the beginning of a loan in addition to monthly interest.
Principal: The amount of the loan.
Reschedule: Changing a timetable for loan repayments, usually granting longer repayment periods and involving new loans to pay off old ones.
Security Interest: The lender’s right to take a borrower’s property, or a portion of their property, offered as security.
Statement: The monthly bill from an issuer that describes and summarizes the activity on an account — includes the outstanding balance, purchases, payments, credits, finance charges and other transactions for the month.
Statement Date: The date on which a statement is generated, and the month’s interest is added to the balance.
Surcharge: An extra charge imposed on those who purchase with a credit card instead of cash.
Variable Rate: An interest rate that may fluctuate over the life of the loan. The rate is often tied to an index that reflects changes in market rates of interest. A fluctuation in this rate causes changes in either the payments or the length of the loan term.
Statement: The monthly bill from an issuer that describes and summarizes the activity on an account — includes the outstanding balance, purchases, payments, credits, finance charges and other transactions for the month.
Statement Date: The date on which a statement is generated, and the month’s interest is added to the balance.
Surcharge: An extra charge imposed on those who purchase with a credit card instead of cash.
Variable Rate: An interest rate that may fluctuate over the life of the loan. The rate is often tied to an index that reflects changes in market rates of interest. A fluctuation in this rate causes changes in either the payments or the length of the loan term.
