Glossary

Glossary

• ACH –
  automatic clearing house -a method of transferring funds to or from
  bank accounts

• Annual Percentage
  Rate (APR) – The cost of credit, expressed as a yearly rate.
  APR is generally not the same as the contract interest rate.

• Balance – The
  amount of money outstanding in an account.

• Bankruptcy –
  A legal proceeding in U.S. Federal Court, entered into by borrowers
  who are unable to pay their debts that allows them to negotiate
  partial payment or the sale of the borrowers assets to partially pay
  back the debt. The information regarding a volentay or court ordered
  bankrupty stay on the borrower’s credit history for up to 10 years.

• Budget – A
  method or plan for the management of spending and saving of money.

• Caps – An
  established limit to the amount interest rates can increase in an
  adjustable rate mortgage loan.

• Cash advance
  – a source of emergency cash for people who are employed but may not
  have access to other credit sources. The advance is meant as bridge
  financing until the next payday. The advance is really a loan,
  interest is charged from the date of the advance.

• Charge off –
  A loan or credit card debt written off as uncollectible from the
  borrower and often the borrower has sold or assigned the debt to a
  collection agency. The debt, however, remains valid and subject to
  collection.

• Checking account
  – Money kept in a bank or savings and loan for safekeeping. Money can
  be easily withdrawn by writing checks or using an ATM or debit card.

• Collateral or
  security – An asset pledged to ensure payment of debt.

• Compound interest
  – Interest computed on the balance of a loan, in which the balance
  includes all unpaid interest.

• Co-signer – A
  person who signs a loan agreement along with the borrower and assumes
  equal responsibility for repayment.

• Credit – A
  promise to pay at a later date for goods or services purchased today.

• Credit application
  – A written request for credit, generally in a form specified by the
  lender. Sometimes, an application fee is charged to cover the cost of
  loan processing.

• Credit bureau
  – A company that compiles credit histories on prospective borrowers
  and provides credit reports to lenders. Lenders use these reports when
  making decisions on extending credit. The three major credit reporting
  agencies are Equifax, Experian and TransUnion.

• Credit card –
  A card issued by a bank authorizing payment for purchases. Interest is
  charged on the outstanding balance.

• Credit counseling
  – Professional counseling provided by organizations that help
  consumers find ways to repay their credit and get their financial
  affairs in order through the careful budgeting and management of
  money.

• Credit limit
  – The maximum amount of money that may be charged on a credit card
  account or line of credit

• Credit line
  (or personal line of credit) – The maximum loan amount a consumer can
  borrow against in an account. As a credit line is partially or fully
  repaid, the consumer can borrow against the account again.

• Credit report
  – A record of someone’s credit history, including outstanding debts,
  debt repayments, late payments and any bankruptcies that is compiled
  by a credit reporting agency.

• Creditor - A
  person or business from whom you borrow, or to whom you owe, money.

• Debit card –
  A card issued by a bank or other fianacial institution and used for
  making purchases. The purchase amount is deducted directly from your
  checking account or other accounts.

• Debt – Money
  owed to another party.

• Debt consolidation
  – A strategy sometimes used by consumers to better manage their debt
  problems. Rather than paying off several separate bills each month, a
  consumer consolidates his or her debts with a financial institution
  that will arrange for one lower monthly payment extending over a
  period of time.

• Default –
  Failure to repay a loan or otherwise meet the terms of a loan
  agreement.

• Delinquency –
  Failure to make payments on time.

• Direct Deposit
  -an electronic transfer of funds to a bank account whereby there is no
  need for a paper check.
  

• Equal Credit
  Opportunity Act – A federal law prohibiting lenders from
  discriminating against applicants for credit.

• E-Signature or
  Electronic Signature -Electronic signature software binds your
  signature, or other mark, to a specific document. In June 2000, the
  U.S. government passed the E-sign bill, which gives electronic
  signatures the same legality as hand-written ones

• Fair Credit
  Reporting Act – A federal law giving consumers the right to
  learn what information credit reporting agencies have on file about
  them and to dispute any inaccurate data in the file.

• Fair Debt
  Collections Practices Act – A federal law to protect consumers
  from any harassing or abusive conduct, the use of false or misleading
  representations or unfair practices in the collection of debts.

• Federal Deposit
  Insurance Corporation (FDIC) - A federal agency that insures
  consumer deposits in a bank or savings and loan for up to $100,000 per
  account. Deposits include checking and savings accounts and
  certificates of deposit.

• Finance charge
  – The cost of credit expressed as a dollar amount.

• Fixed interest rate
  – An interest rate that does not change over the term of the loan.

• Foreclosure –
  A legal process in which property or other collateral which has been
  pledged as security for a loan may be sold to help repay the loan
  after a borrower has defaulted.

• Installment loan
  – A loan in which the amount of payment and the number of payments are
  predetermined.

• Interest -
  The amount a lender charges a customer for borrowing money.

• Interest rate
  – The rate that lenders charge their borrowers for borrowing money.
  Usually expressed in terms of percentage per year.

• Judgment – An
  order made by a court related to a lawsuit that decided who wins and
  who loses an issue brought before the courts on civil matters.

• Late payment fee
  – A fee charged for a loan payment not received by the due date.

• Lease - A
  contract that allows a consumer to use an asset, such as a car, in
  exchange for payment. At the end of the lease term, the asset must be
  returned.

• Lender – A
  person or business which lends or offers loans to customers. Also
  referred to as a creditor.

• Liable –
  Having legal responsibility.

• Lien - A
  claim placed by a creditor on a piece of real estate, or property, to
  ensure the payment of a debt.

• Loan – An
  amount borrowed to be repaid at a later date, with interest.

• Loan agreement
  – A contract that spells out in detail the terms and conditions of a
  loan.

• Mortgage loan
  – A loan used for the purchase of real estate. The property serves as
  security, or collateral, for the loan.

• Public record
  – Information obtained from local, state or federal courts indicating
  a person’s history of meeting financial obligations, including alimony
  and child support.

• Refinance –
  Paying off an existing loan with the proceeds from a new loan usually
  done to get a lower interest rate.

• Repossess –
  Forced or voluntary surrender of merchandise as a result of a
  consumer’s failure to repay a loan as promised.

• Right of rescission
  – A borrower’s right to cancel a contract within three business days.

• Savings account
  – Money kept in a bank or savings and loan association for
  safekeeping. Savings accounts earn interest on all money kept in the
  account.

• Secured loan
  – A loan in which a borrower pledges an asset such as a home or car
  that may be sold if the borrower is unable to repay the loan.

• Security –
  See collateral.

• Simple interest
  – Interest computed on the principal balance outstanding as long as
  any portion remains unpaid.

• Title – A
  legal document that provides evidence of property ownership.

• Truth in Lending Act
  – A federal law that requires lenders to disclose to the borrower the
  true cost of a loan, including the actual interest rate and all terms
  and conditions of the loan, in a manner that is easily understood.

• Unsecured loan
  – A loan granted based only on the borrower’s promise to repay.

• Variable interest
  rate – An interest rate that changes based on an index, such as
  the prime rate.

• Yield -the
  effective rate of return paid on a savings or money market account or
  bond.