Glossary

ACH– automatic clearing house –this is used to transfer money to or from a bank account.

Annual Percentage Rate (APR)– This is the price one pays for credit, expressed as an annual rate. APR is usually not identical to the contract interest rate.

Balance – This is the total amount of money in an account.

Bankruptcy – This is a process by which someone is unable to pay their debts and their assets become subject to a court supervised liquidation plan.

Budget – This is a strategy for spending and saving the money you make.

Caps – This is the largest that an interest rate can be on an adjustable rate mortgage used to buy a home.

Cash advance – This is a type of loan, often taken out in an emergency that is used to cover costs until the borrower’s payday comes up.

Charge off – This is a declaration by a creditor that a certain loan or debt will not be collected. Sometimes this debt is instead assigned to a collection agency.

Checking account – This is a type of account kept in a bank for safety purposes and to accrue interest. The money is accessible through writing checks or using an ATM card.

Collateral or security – This is a way to ensure the payment of debt by offering an asset if the debt is not paid.

Compound interest – This is interest that’s calculated on the balance of a loan and that includes the interest that is unpaid.

Co-signer – This is a person who signs onto a loan in addition to the actual borrower and takes on responsibility for the loan.

Credit – This is when you buy something now with the goal of paying for it later.

Credit application – This is a request for credit that is either written or online, submitted to a lender.

Credit bureau – is a type of company that keeps track of things that affect credit. Lenders use this type of data when determining whether or not to approve credit applications.

Credit card – This is a type of card that is used for making purchases with the intent of paying for them at a later date.

Credit counseling – This is a type of help advising consumers how to repay their debt and manage their money.

Credit limit - is the most that you can be charged on your credit card or on your line of credit.

Credit line (or personal line of credit) –This is the amount of money you can borrow against your account. Once you have repaid this credit, you may borrow again.

Credit report – This is information about a person’s credit history including information about old and outstanding loans and about anything else that can affect credit.

Creditor - This is a person or an organization who you owe money to.

Debit card – This is a card that is liked to a bank account that allows you to withdraw money from said account.

Debt – This is money that you owe to a person or organization.

Debt consolidation – This is a method for controlling debt that requires combining all of your loans, with the help of an authorized financial institution, and negotiating one reasonable monthly payment.

Default – This is the inability to repay your debt based on your loan agreement.

Delinquency – This is making a late payment on a loan.

Direct Deposit – This is receiving money through an electronic transfer rather than receiving a paper check.

Equal Credit Opportunity Act – This is a federal law that prevents discrimination when it comes to lending money.

E-Signature or Electronic Signature - This is a type of software that allows you to submit your signature electronically rather than in written form.

Fair Credit Reporting Act – This is a federal law that allows people to have access to their credit histories to contest any incorrect information.

Fair Debt Collections Practices Act – This is a federal law that prevents debt collectors from harassing or abusing those they are trying to collect debt from.

Federal Deposit Insurance Corporation (FDIC) - This is a federal agency that insures the money that individuals deposit in certain institutions for up to $100,000.

Finance charge – This is the amount a consumer pays for credit, expressed in dollars.

Fixed interest rate – This is an interest rate that remains the same for the term of the loan.

Foreclosure – This is a process when a borrower has defaulted on a loan and the collateral on that loan must be sold to repay the loan.

Installment loan – This is a type of loan that is repaid over time and over a number of payments.

Interest - This is the amount of money that someone is charged for a loan.

Interest rate – This is the rate at which money is charged for taking out a loan, usually stated as an annual percentage.

Judgment – A decision made by a court.

Late payment fee – This is a penalty for making a loan payment later than the agreed upon date.

Lease - This is an agreement that allows a person to borrow an asset. The borrower pays to borrow the asset and the asset is returned once the term ends.

Lender – This is an individual or a company that lends money or offers to lend money.

Liable – This is to be legally responsible for something.

Lien - This is an interest in property held by a creditor that permits the creditor to foreclose to recover on debts.

Loan – This is an agreement to repay money that has been borrowed.

Loan agreement – This is a contract that details the repayment and any other particulars of the loan.

Mortgage loan – is a loan taken out specifically to buy property.

Public record – This is official government information about a person’s financial responsibilities and their history.

Refinance – This is a loan taken out with more favorable terms to repay an old loan with less favorable terms.

Repossess – This is the acquisition of a piece of property that is taken because the consumer could not repay a loan.

Right of rescission – This is the ability of a borrower to cancel a contract within three business days after signing it.

Savings account - This is money kept in a financial institution that can earn interest.

Secured loan – This is a type of loan in which the borrower puts up collateral which can be sold if the loan cannot be repaid.

Simple interest – This is interest paid on the unpaid principle balance.

Title – This is a document that serves as legal proof of ownership.

Truth in Lending Act – This is a federal law that forces lenders to make certain disclosures in financial promotions.

Unsecured loan – This is a type of loan that funded without any security or collateral.

Variable interest rate – This is a type of interest rate that may change based on an index.

Yield– This is the interest on a loan.