#Definitions
ACH
This stands for automatic clearing house, which is mainly a
method used to transfer funds to and from bank accounts.
APR or Annual Percentage Rate
This is the cost of credit which is expressed in a yearly rate.
This is not the same as contract interest rate.
Balance
This refers to the outstanding in your bank account.
Bankruptcy
This is a legal proceeding in America's Federal Court which in
entered into by a borrower. This is often someone who is not
able to pay back his debts which allows for them to negotiate
some form of partial payment or the selling of a borrower's
assets. Bankruptcy information will stay on the credit history
of a person for up to a decade.
Budget
A plan or method used for spending management and for saving
money.
Caps
The established limit of an amount's interest rate which can be
increased to an adjustable rate mortgage loan.
Cash advance
This refers to a source of cash which can be taken in the case
of emergencies. This is for people who are employed but may not
have access to other sources of credit. This is meant to bridge
the financial gap in between now and the next pay day. The
interest is charged from the date it is advanced.
Charge off
This is a credit card debt or loan which is written off as being
uncollectible from a borrower. This at times is the case when
the loan has been sold or given the debt to some collection
agency. This debt remains collectable.
Checking account
The money which is kept in savings or a bank for safekeeping.
This money can be withdrawn easily by simply writing out a check
or using an ATM machine.
Security or Collateral
Often an asset which is pledged in order to assure repayment of
debt.
Compound interest
Interest which is computed on the loan's balance, the balance
will include all interest which is unpaid.
Co-signer
An individual who willfully signs a loan agreement with the
borrower and partly assumes responsibility of repayment of a
loan.
Credit
The promise to pay the amount at a later date for services or
goods availed presently.
Credit request
A request for credit given in writing. At times an request fee
will be charged in order to cover the cost of processing the
loan.
Credit bureau
An organization that works to compile the credit histories of
would be borrowers and also provides these reports to lenders
and lending partners. These reports are used by lenders and
lending partners for making decisions. Experian, TransUnion and
Equifax are the largest credit reporting agencies in America.
Credit card
This is a card issued by the bank in order to make payments for
purchases. The outstanding balance is subject to interest.
Credit counseling
A type of counseling which is provided by organizations aimed at
helping consumers with ways to repair their credit so as to get
their financial affairs back on track.
Credit limit
The most amount of money which is allowed to be charged on a
line of credit or credit card.
Credit line
This is also often referred to personal line of credit and is
the maximum amount a person can get against his or her account.
Once the credit line has been repaid the person can then
re-borrow against this account.
Credit report
This is a report which is actually the history of a person's
debt repayment, outstanding debts, bankruptcies and late
payments. It will also have his or her bankruptcies.
Creditor
A business or person from who you are borrowing or someone you
owe money to.
Debit card
This is a card issued by a bank or some other financial
institution and often used for purchases. The purchase is
deducted directly from a checking account.
Debt
The amount which is owed to a lender or lending partner.
Debt Consolidation
This refers to a strategy which is at times used by people to
improve their debt management issues. Instead of opting to pay
several bills every month a consumer will just pay his debt with
one bill to one financial institution.
Default
The failure to pay back a loan or meet the terms the loan
agreement.
Delinquency
Failing to pay on time.
Direct Deposit
This is an electronic funds transfer directly to a bank account,
so paper check is not needed.
Equal Credit Opportunity Act
This is a federal law which prohibits lenders and lending
partners from any sort of applicant discrimination.
E-Signature
Often referred to as an electronic signature this requires a
software which binds your signature or some other mark to a
document. The E-sign bill was passed by the government in June
2000 which legalizes this signature.
The Fair Credit Reporting Act
This is a federal law which gives borrowers the right to lean
exactly what info credit reporting agencies currently have on
them, it also enables them to dispute incorrect data.
FDIC or Federal Deposit Insurance Corporation
Usually a federal agency which insures a consumer's deposit in
their savings and for a loan of up to $100,000 for every
account. These deposits will include savings and checking
accounts and also deposit certificates.
Finance charge
Credit costs expressed in a dollar amount.
A fixed interest rate
A rate of interest which will not change through the term of the
loan.
Foreclosure
This is a legal process in which collateral that has been
pledged for a loan can be sold in order to repay the loan if the
borrower defaults.
Installment loan
This is a loan that has a predetermined number of payments and
loan amount.
Interest
A fee that the lender or lending partner charges for borrowing a
sum of money.
Interest rate
A rate that a lender or lending partner will charge borrowers in
order to borrow money from them. It is expressed in percentage %
per annum.
Judgment
This is a court order which is made by the court and which is
related to a lawsuit. It actually decides who wins the case.
Late payment fee
This is a charge for a payment which is not received in time.
Lease
This is a legal contract which allows a consumer to use some
asset like a car for payment. The asset needs to be returned
once the lease term ends.
Lender or Lending Partner
A business or a person who lends or even offers loans to people.
Liable
to have legal responsibility.
Lien
When a creditor lays claim to a piece of property to ensure his
debt is paid off.
Loan
Any amount which is borrowed so that it can be repaid later with
added interest.
Loan Agreement
This is a legal contract which details the conditions and the
terms of the loan.
Mortgage loan
This is used to purchase a piece of real estate. Here the
property is actually the security for this loan.
Public Record
This is information which is gotten from federal, state or other
sources which details a person's history of financial
obligations which includes child support and alimony.
Refinance
To pay off an existing loan with whatever proceeds have been had
from the new loan in order to enjoy a lower interest rate.
Repossess
The voluntary or forced surrender of items in the case of a
consumer's failure to pay back a loan.
Right of recession
The right of a borrower to cancel the contract within just three
working days.
Savings account
The money which his kept in a savings account and for
safekeeping. Big reason here is that savings accounts will earn
interest on money kept in this account.
Secured loan
This is a loan where the borrower will pledge his asset like a
car or home which will be sold if he is not able to pay back the
loan.
Security
check collateral.
Simple interest
The interest is computed on the basis of outstanding as long as
some portions remain still unpaid.
Title
A document which proves ownership of property.
Truth in Lending Act
This is a federal law which mostly requires lenders and lending
partners to be able to disclose to their borrowers the actual
cost of the loan. This will include the actual interest rate as
well as the terms and conditions of this loan in an easy to
understand fashion.
#Unsecured loan This is a loan given on the bases of a
borrower's word to pay back.
#Variable interest rate This is an interest rate which will
change based on the current index, like a prime rate.
#Yield Often used for an effective rate of return which is paid
on money market accounts, bonds or savings.
