Definitions:
ACH (Automatic Clearing House) – A method used to transfer funds electronically to and from bank accounts.
APR (Annual Percentage Rate) – The yearly cost of credit, not to be confused with the contract interest rate.
Balance – The amount of money remaining in your bank account.
Bankruptcy – A legal process in U.S. Federal Court for borrowers unable to repay debts, allowing negotiation of partial payment or asset liquidation. Bankruptcy information stays on credit reports for up to ten years.
Budget – A plan to manage spending and savings.
Caps – Limits on how much the interest rate can increase on an adjustable-rate mortgage loan.
Cash Advance – Short-term cash provided for emergencies, typically used by people who need funds between paydays. Interest is charged from the day the advance is made.
Charge Off – A debt considered uncollectible, often sold to a collection agency, but still legally collectable.
Checking Account – A bank account for safekeeping money, easily accessible via checks or ATM withdrawals.
Security/Collateral – Assets pledged to guarantee loan repayment.
Compound Interest – Interest calculated on the outstanding loan balance, including unpaid interest.
Co-signer – A person who signs a loan agreement alongside the borrower, sharing the responsibility for repayment.
Credit – A commitment to pay for goods or services later.
Credit Request – A written application for credit, often accompanied by a processing fee.
Credit Bureau – Agencies that compile credit histories for lenders. The largest are Experian, TransUnion, and Equifax.
Credit Card – A card issued by a bank allowing purchases to be made on credit, with interest applied to unpaid balances.
Credit Counseling – Services offered to help consumers improve their credit and manage their financial affairs.
Credit Limit – The maximum amount that can be charged on a credit line or card.
Credit Line – Also called a personal line of credit, it’s the maximum amount a person can borrow. Repaid credit can be borrowed again.
Credit Report – A detailed history of a person’s debt repayment, including late payments, bankruptcies, and outstanding balances.
Creditor – A person or business from whom you borrow money.
Debit Card – A card issued by a bank for purchases, with the funds deducted directly from your checking account.
Debt – Money owed to a lender.
Debt Consolidation – A strategy to manage debt by combining multiple bills into a single payment to one lender.
Default – Failing to repay a loan or meet the terms of the loan agreement.
Delinquency – The failure to make payments on time.
Direct Deposit – An electronic transfer of funds directly into a bank account, eliminating the need for paper checks.
Equal Credit Opportunity Act – A U.S. federal law prohibiting discrimination by lenders.
E-Signature – An electronic signature legally recognized since the E-Sign Bill was passed in June 2000.
Fair Credit Reporting Act – A federal law granting consumers the right to know what information credit reporting agencies have on them and to dispute incorrect data.
FDIC (Federal Deposit Insurance Corporation) – A federal agency that insures deposits up to $100,000 per account in banks and savings institutions.
Finance Charge – The cost of credit, expressed as a dollar amount.
Fixed Interest Rate – An interest rate that remains unchanged throughout the loan term.
Foreclosure – The legal process in which a lender can sell collateral pledged for a loan if the borrower defaults.
Installment Loan – A loan repaid over time with a fixed number of scheduled payments.
Interest – The fee charged by a lender for borrowing money.
Interest Rate – The percentage charged annually for borrowing money.
Judgment – A court decision in a lawsuit determining who wins the case.
Late Payment Fee – A charge applied for not making a payment by the due date.
Lease – A legal contract allowing the use of an asset (like a car) for payment, with the asset returned at the end of the lease term.
Lender – A person or business that provides loans.
Liable – Having legal responsibility.
Lien – A creditor’s claim on property to ensure repayment of debt.
Loan – A sum of money borrowed with the promise to repay with interest.
Loan Agreement – A legal document detailing the terms and conditions of a loan.
Mortgage Loan – A loan used to purchase real estate, with the property serving as collateral.
Public Record – Information obtained from federal, state, or local sources, detailing a person’s financial obligations like child support or alimony.
Refinance – Paying off an existing loan with proceeds from a new loan, often to secure a lower interest rate.
Repossess – The forced or voluntary surrender of property when a borrower fails to repay a loan.
Right of Rescission – The right of a borrower to cancel a loan contract within three business days.
Savings Account – A bank account where money is saved and earns interest.
Secured Loan – A loan in which the borrower pledges an asset, such as a car or home, as collateral.
Simple Interest – Interest calculated on the outstanding loan balance.
Title – A document proving ownership of property.
Truth in Lending Act – A federal law requiring lenders to disclose the actual cost of a loan, including the interest rate and terms, in an easily understandable format.
Unsecured Loan – A loan granted based on the borrower’s promise to repay, without collateral.
Variable Interest Rate – An interest rate that fluctuates based on an index like the prime rate.
Yield – The effective rate of return on money market accounts, bonds, or savings.
