Frequently Used Terms
- Automated Clearing House (ACH) - A method of transferring funds to or from bank accounts.
- Annual Percentage Rate (APR) - The cost of credit, expressed as a yearly rate.
- Balance Due - The amount of money due on an account.
- Bankruptcy - A legal proceeding in U.S. Federal Court, entered into by borrowers who are unable to
debts that allows them to negotiate partial payment or the sale of the borrowers assets to partially pay
back the debt.
- Budget - A plan for the management of spending and saving of money.
- 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 a "bridge" until their next pay date.
- Charge Off - A loan or credit card debt written off as uncollectible from the borrower and
borrower has sold or assigned the debt to a collection agency. This debt, however, remains valid and subject
- Checking Account - Money kept in a bank or savings and loan for safekeeping. Money can be
by writing checks or using an ATM or debit card.
- Collateral or Security - An asset pledged to ensure payment of a debt.
- 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
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
- 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. 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
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 financial institution, and used for making
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
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 timely payments.
- Direct Deposit - An electronic transfer of funds to a bank account whereby there is no need
for a paper
- Equal Credit Opportunity Act - A federal law prohibiting lenders from discriminating
against applicants for
- 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
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
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 $250,000 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.
- Installment Loan - A loan in which the amount of payment and the number of payments are
- 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.
- Late Payment Fee - A fee charged for a loan payment not received by the due date.
- Lender - A person or business who lends or offers loans to customers. Also referred to as a
- Liable - Having legal responsibility.
- Lien - A claim placed by a creditor on a piece of 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.
- Refinance - Paying off an existing loan with the proceeds from a new loan which is 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
- Right of Rescission - A borrower's right to cancel a contract with no cost or penalty (most
- 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
- 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
- Unsecured Loan - A loan granted based only on the borrower's promise to repay and not based
- Variable Interest Rate - An interest rate that changes based on an index, such as the prime
- Yield - The effective rate of return paid on a savings or money market account or bond.