Financial Terms: A – C
ACH (Automated Clearing House)This secure network allows for electronically transferring funds between bank accounts.
APR (Annual Percentage Rate)Represents the yearly cost of borrowing, expressed as a percentage. Note: this is not the same as the contractual interest rate.
AssetValuable items owned by an individual, often used as collateral for loans.
BalanceThe specific amount currently held or owed in a bank or credit account.
BankruptcyFederal courts oversee this legal process, allowing individuals unable to repay debts to restructure obligations. It remains on a credit report for up to 10 years.
BudgetPlanning income, spending, and savings helps manage finances effectively.
CapsLimits on how much the interest rate can increase on an adjustable-rate mortgage.
Cash AdvanceShort-term loans intended to cover urgent expenses until the next payday. Typically, interest begins accruing immediately.
Charge-OffLenders declare this debt uncollectible and write it off. It is often transferred to a collection agency but remains legally owed.
Checking AccountEveryday transactions occur in this bank account, allowing deposits and withdrawals via checks or debit cards.
CollateralProperty pledged to secure a loan; the lender can repossess it if the loan is not repaid.
Compound InterestCalculating interest on both the principal and any previously accrued interest.
Co-SignerAnother person who agrees to share the responsibility of loan repayment with the borrower.
CreditObtaining goods, services, or money now with a promise to pay later.
Credit ApplicationRequests for credit are made in writing, sometimes requiring a fee for processing.
Credit BureauAgencies that collect credit information and issue reports to lenders. Specifically, major bureaus include Equifax, Experian, and TransUnion.
Credit CardPurchases are made on credit using this bank-issued card; balances accrue interest if not paid in full.
Credit CounselingProfessional guidance helps individuals manage or repair their credit.
Credit LimitMaximum amounts available on a credit card or line of credit.
Credit LineAlso called a line of credit; the maximum loanable amount that can be reused once repaid.
Credit ReportDetailed records of a person’s credit history, including debts, repayments, and delinquencies.
CreditorInstitutions or people to whom money is owed.
Financial Terms: D – L
Debit CardLinked directly to a bank account, this card is used to make purchases with funds deducted immediately.
DebtMoney borrowed and owed to a lender.
Debt ConsolidationCombining multiple debts into a single payment often results in a lower interest rate.
DefaultFailure to meet the terms of a loan agreement or to make timely payments.
DelinquencyMissed or late payments on a credit account.
Direct DepositElectronically depositing funds directly into a recipient’s bank account eliminates the need for paper checks.
Equal Credit Opportunity Act (ECOA)Discrimination against credit applicants is prohibited by this U.S. law.
E-SignatureDigital signatures are legally binding and used to sign electronic documents.
Fair Credit Reporting Act (FCRA)Federal laws ensure consumers can access and dispute information on their credit reports.
FDIC (Federal Deposit Insurance Corporation)Government agency insuring deposits up to $250,000 per depositor per bank.
Finance ChargeTotal costs of borrowing, including interest and fees.
Fixed Interest RateRates that remain unchanged for the duration of the loan.
ForeclosureLegal actions allowing a lender to sell property pledged as collateral if the borrower defaults.
Installment LoanRepaying a loan in regular payments over a set period.
InterestBorrowing money costs this percentage of the loan amount.
Interest RateAnnual percentages charged by a lender on borrowed funds.
JudgmentCourt decisions resulting from a lawsuit, determining responsibility for debt repayment.
Late Payment FeeCharges applied for making a payment after its due date.
LeaseAgreements allowing use of an asset, such as a car, for a set time and payment.
LenderProviders of loans, whether institutions or individuals.
LiableLegally responsible for a debt or obligation.
LienClaims against property used as security for a debt.
LoanFunds borrowed with a promise to repay, usually with interest.
Loan AgreementContracts outlining loan terms and conditions formally.
Financial Terms: M – Z
Mortgage LoanReal estate purchases are funded by this loan, using the property as collateral.
Public RecordOfficial financial files (e.g., bankruptcies, liens) available through government agencies.
RefinanceReplacing an existing loan with a new one typically secures better terms.
RepossessSeizing property used as collateral when a borrower fails to repay.
Right of RescissionCanceling certain loan agreements is a borrower’s right within three business days.
Savings AccountAccounts that earn interest on deposits are used for saving money.
Secured LoanLoans backed by collateral (e.g., car, home).
SecuritySee: Collateral.
Simple InterestCalculating interest only on the principal balance.
TitleDocuments proving legal ownership of property.
Truth in Lending Act (TILA)Disclosing loan costs, including APR and terms, is required by this law.
Unsecured LoanLoans not backed by collateral rely solely on the borrower’s creditworthiness.
Variable Interest RateChanging periodically, this interest rate is based on an index.
YieldEffective returns on financial products like savings accounts, bonds, or money market instruments.