Definitions

ACH or Automatic Clearing House – this is a method for transferring funds between bank accounts.

APR or Annual Percentage Rates – this is a cost of a credit that is included in the yearly percentage rate. 

Balance – this is the outstanding of a bank account.

Bankruptcy – this is the legal proceeding by a borrower that is filed with America’s Federal Court. A filing person is often not able to pay their debts, which allows them to sell their assets or negotiate a partial payment. However, information about bankruptcy is included in the person’s credit history.

Budget – this is a financial plan that is used to manage spendings and savings.

Cap – this is an established limit of a person’s interest rate. It can be increased through a mortgage loan with an adjustable rate.

Cash advance – this is a source of cash that can be used as an emergency one. It is used by employed people that are not able to access different sources of credit. Cash advance is utilized as a bridge between current and the next day’s pay. The interest rate is charged from the day it is advanced.

Charge off – this is a loan or credit card debt that is identified as uncollectible from the borrower. It is used when the loan is given to the collection agency or has been sold. However, the debt remains collectable.

Checking account – these are funds that are held for safekeeping as savings. It is possible to easily withdraw the money by writing a check or using an ATM.

Security or Collateral – an asset that is used as an assurance of payment for the debt.

Co-signer – a person who willingly takes responsibility for the repayment of loan by signing an agreement with a borrower.

Credit – this is a pledge to later pay for goods and/or services bought at the present moment.

Credit bureau – this is an organization that compiles credit histories of potential borrowers and sends these reports to lenders and their affiliates, giving them information to make decisions. Some of America’s largest credit bureaus are TransUnion, Equifax, and Experian.

Credit card – is a card given by the bank and it is used for payments and purchases. Negative balance is subject to interest.

Credit counseling – this is a type of counseling that is provided by organizations that offer services aimed at repairing clients’ credits to stabilize their financial situation.

Credit limit – this is the sum of money that is available on the credit line or credit card.

Credit line – this is the maximum sum of money that a person can borrow. It is possible to repay the credit and re-borrow again.

Credit report – this is a report that includes information about the person’s late payments, bankruptcies, outstanding debts, and debt repayments. 

Creditor – a person or organization from whom a client is borrowing money.

Debit card – this card is used for various purchases and is issued either by a bank or some financial institution. Any purchases are withdrawn directly from a person’s checking account.

Debt – this is a sum of money owed to a lender or lending institution.

Debt consolidation – this is a strategy that is used by people to improve their debt management. A consumer is paying one bill to a financial institution instead of several bills every month.

Default – this is a failure to repay a loan or meet previously accepted loan agreements.

Delinquency – refers to a failure to make a payment on time.

Direct deposit – this is an electronic transfer of funds to a bank account. It does not require paper checks.

Equal Credit Opportunity Act – this is a federal law that prohibits any kind of discrimination from lenders and lending partners.

E-Signature – this is software that binds a person’s signature or mark to a document. The E-Signature bill was passed in June 2000.

Fair Credit Reporting Act – this is a federal law that allows borrowers to acquire information that credit reporting agencies have on them. It also enables borrowers to dispute any incorrect data.

Fair Debt Collections Practices Act – this is a federal law that is aimed at protecting people from abusive and/or harrasive acts or misleading and false claims for debt collection.

FDIC or Federal Deposit Insurance Corporation – often this is a federal agency that insures consumer’s deposit in savings and for a loan. The amount can go up to $100,000 for every account. Deposits include savings, checking accounts, and deposit certificates.

Finance charge – these are the credit costs expressed in dollars.

Fixed interest rate – this is an interest rate that does not change during the term of a loan.

Foreclosure – this is a legal process that allows selling collateral that has been pledged for a loan to repay it in the case if the borrower defaults.

Installment loan – this is a loan with a specific number of payments and loan money. 

Interest – this is a fee charged by the loaner for borrowing funds.

Interest rate – this is a rate charged by the lender from a borrower. This rate is expressed in percentages per annum.

Judgment – this is a court order that is made by a court that is concerning a lawsuit. This is a decision of who wins the case.

Late payment fee – this is a charge for a payment that has missed a deadline.

Lease – this is a legal contract that allows a person to use some asset as a method of payment. The asset has to be returned after the lease expires.

Lender or Lending Partner – a business or a person who lends money or offers loans to customers.

Liable – refers to having legal responsibility for something or someone.

Lien – refers to the lender’s claim of the borrower’s property to make sure that the debt is paid off.

Loan – refers to any amount of money that is borrowed to be later returned with an added interest.

Loan management – this is a legal contract that details the loan’s terms and conditions.

Mortgage loan – this loan is used to purchase real estate property. As a result, the property is used as a warranty of repaying the loan.

Public record – this is information that is acquired from either state, federal, or other sources that details a person’s history of financial obligations, including things such as alimony and child support.

Refinance – refers to paying off an existing loan with the proceedings from a new one to a lower interest rate.

Repossess – refers to a voluntary or forced surrender of property if the borrower fails to repay a loan.

Right of recession – refers to the right of a borrower to cancel a contract within three business days.

Savings account – this is the money kept in a savings account for a purpose of safekeeping. Savings accounts actually earn interest on money deposited in the account.

Secured loan – this is a loan when the borrower pledges some asset or property that is going to be sold in the case a person is not able to repay a loan.

Security – please check collateral.

Simple interest – this is an interest that is computed based on outstanding while some portions of it are still unpaid.

Title – refers to a document that proves ownership of a property.

Truth in Lending Act – this is a federal law that requires lenders and lending partners to disclose an actual cost of a loan to the borrowers. Therefore, this includes information about the actual interest rate as well as terms and conditions of a loan provided in an easy-to-understand manner.

Unsecured loan – refers to a loan given to a borrower based on their word to pay back.

Variable interest rate – is an interest rate that is changing on the basis of the current index, just like the prime rate.

Yield – this is often used for an effective rate of return that is paid on money market accounts, savings, or bonds.