Glossary for Personal Loans

A B C D E G H I J L M N P R S T V
  1. Annual Percentage Rate (APR) - The cost of credit as a yearly rate.
  2. Balance - An amount in excess especially on the credit side of an account.
  3. Billing Error - Any mistake in a monthly statement as defined by the Fair Credit Billing Act.
  4. Broker - An agent who negotiates contracts of purchase and sale.
  5. Certificate of Title - A written opinion or a certificate issued by a title company that states that the seller has a good marketable and insurable title to the property being offered for sale. This certificate offers no protections against hidden defects in the title, which an examination of the records could not reveal.
  6. Check Draft - An official approval package, containing a check draft made out for the maximum amount, that is sent in the mail after you have been approved. This is valid at any franchised auto dealer. A customer simply fills in the exact amount of purchase.
  7. Conventional Loan - A loan that is not insured by the government.
  8. Credit - The balance (as in a bank) in a person’s favor.
  9. Credit History - A person’s record of how you have borrowed and repaid debts.
  10. Credit Scoring - A system that is used to rate credit applicants.
  11. Depreciation - The decrease or decline in the value of a vehicle.
  12. Disclosures - Information that must be given to consumers about their financial dealings.
  13. Down Payment - The amount of money that is paid between the purchase price and loan amount.
  14. Earnest Money - The amount of money that is paid upfront as part of the purchase price to bind a transaction that will ensure payment.
  15. Equal Credit Opportunity Act (ECOA) - A federal law that requires lenders to loan without discrimination based on race, color, religion, national origin, sex, marital status or income from public assistance programs. Lenders are able to discriminate against credit risks that are known not to pay their bills.
  16. Equity - The value of a property or of an interest in it in excess of claims against it.
  17. Guarantee - An agreement by which one person undertakes to secure another in the possession of something.
  18. Household Income - The total income of all members of a household. An important yardstick used by credit card issuers evaluating applications for joint credit.
  19. Installment Loan - Monthly payments that are applied to the actual purchase of the vehicle. A person will own the vehicle at the end of the loan by making these monthly payments.
  20. Interest - A charge for borrowed money that is generally a percentage of the amount borrowed.
  21. Jumbo Loan - A loan over $200,000.
  22. Liability on an Account - Legal responsibility to repay debt.
  23. Lien - A legal claim on the property of another for the satisfaction of a debt or duty.
  24. Minimum payment - The minimum amount a card holder can pay to keep the account from going into default. Some card issuers will set a high minimum if they are uncertain of the card holders ability to pay. Most card issuers require a minimum payment of 2 percent of the outstanding balance.
  25. MSRP - Manufacturer’s Suggested Retail Price that represents the manufacturer’s recommended selling price for a vehicle and each of its options.
  26. Negative Amortization - This occurs when monthly payments are not large enough to pay all the interest due on the loan. The unpaid interest is added to the unpaid balance of the loan. This can result in the borrower owing more than the original amount of the loan.
  27. Net Effective Income - A person’s gross income minus federal income tax.
  28. Prime rate - The interest rate a bank charges to its best or "prime" customers. Each bank will quote a prime lending rate. The rate given to consumers on their credit cards is often based on the prime rate plus a certain percentage, which represents the lender's assessment of the risk in lending, plus its profit margin.
  29. Principal - The amount of money, minus interest, owned on a loan.
  30. Refinancing - Paying off one loan with the proceeds from another loan.
  31. Rule of 72 - Divide the number 72 by the percentage rate you are paying on your debt or earning on your investment. This will give you the time it will take in years to double your investment or debt given you make no more deposits or no more payments.
  32. Security - Something given as a pledge of payment.
  33. Security Interest - The creditor’s ability to take property offered as security.
  34. Service Charge - Finance charges such as the fee for triggering an overdraft checking account into use, using balance transfer checks, or credit card checks.
  35. Servicing - The steps a lender performs to keep a loan in good standing, such as payment of taxes, insurance, collection of payment, etc.
  36. Settlement - The closing of a loan agreement.
  37. Title - A document that is evidence of an individual’s ownership of property.
  38. Verification of Employment - A document that is signed by the borrower’s employer indicating that the borrower is employed with their company and the dollar amount the borrower makes per year.

Glossaries