Glossary of Terms

A

  • APR (Annual Percentage Rate)

    The yearly cost of borrowing money, shown as a percentage of the amount borrowed.

  • Asset

    Property owned by an individual which holds value and is available to meet debts.

B

  • Bankruptcy

    Legal proceedings where a person's assets are dissolved by the court to pay for their debts.

C

  • Charge-off

    Describes an account that has been past due for at least 180 days with the creditor not having received payment.

  • Collateral

    Assets that a borrower pledges to secure repayment of a loan.

  • Consolidation

    Combining several monthly payments into one single monthly payment.

  • Credit Counseling

    Process by which a certified credit counselor assesses your financial situation and creates an action plan to get your finances back on track.

  • Credit Report

    A detailed report of your entire credit history involving mortgages, auto loans, student loans, and credit cards, among other items.

  • Credit Score

    A numerical score ranging from 300-850 which conveys to lenders your creditworthiness.

D

  • Debt Consolidation Loan

    A loan which is used to combine several smaller loans in order to have one single monthly payment.

  • Debt Settlement

    Process of negotiating with creditors to settle a debt for less than the original amount owed.

  • Delinquency

    An account status when a borrower misses their scheduled payments.

E

  • Equifax

    One of the three major credit bureaus.

  • Experian

    One of the three major credit bureaus.

F

  • FICO Score

    Credit scoring model created by the Fair Isaac Corporation, which ranges from 300-850.

  • Fixed Rate

    An interest rate that cannot fluctuate for the borrower.

  • Forbearance

    Temporary postponement granted by the lender (typically relating to student loans) when the borrower cannot make payments.

  • Foreclosure

    When a lender legally seizes a property due to the borrower being unable to make payments.

G

  • Garnishment

    The act of an employer withholding an employee's compensation to pay off a creditor.

H

  • Hard Inquiry

    A type of credit check done by lenders when applying for credit which can lower the borrower's score.

I

  • Installment Loan

    A debt in which the borrower pays a set amount, usually once a month, until the debt is paid off.

  • Interest Rate

    The cost of borrowing money, usually expressed as a percentage.

J

  • Judgment

    A legal decision from a judge on a civil action or lawsuit, usually to satisfy a debt or penalty.

L

  • Lease

    A legal contact binding two parties for the rental of property or goods.

  • Lender

    Firm or institution that makes money available for borrowing.

  • Liability

    An obligation to pay money back to a lender.

  • Lien

    The right of a creditor to secure a debt against the property of a borrower.

  • Liquidation

    Converting assets into cash.

  • Loan Forgiveness

    The writing off of debts by a lender (typically student loans).

M

  • Mortgage

    Loan used to purchase a commercial or residential property.

P

  • Personal Loan

    A loan for personal use which has no collateral.

  • Power of Attorney

    Legal document allowing a person to make financial decisions on behalf of someone else.

  • Prime Rate

    Describes a low interest rate, usually offered to the most creditworthy borrowers.

  • Principal

    The amount of money financed or borrowed, excluding interest.

R

  • Refinancing

    Replacing an old loan with a new loan at a different (typically lower) interest rate.

  • Repossession

    The process by which a creditor legally seizes one's property as a response to a borrower not paying on their debt.

S

  • Secured Debt

    A loan backed by a borrower's asset (home, car, etc.).

T

  • Term

    Represents the period of time over which a loan will be repaid.

  • Transunion

    One of the three major credit bureaus.

U

  • Unsecured Loan

    A loan that is not backed by collateral.

V

  • Variable Rate

    An interest rate that can fluctuate with the market.

"A wise person should have money in their head, but not in their heart."
- Jonathan Swift