Definitions

ACH (Automated Clearing House) - A secure network used to move money electronically between bank accounts, often for direct deposits or bill payments.

APR (Annual Percentage Rate) - The yearly cost of borrowing expressed as a percentage. It includes interest and some fees, offering a more complete view than just the interest rate.

Balance - The current amount of money in an account or the amount still owed on a loan or credit line.

Bankruptcy - A legal action in federal court that helps individuals or businesses who can't repay their debts. It can lead to partial repayment or asset liquidation and stays on your credit report for up to 10 years.

Budget - A personal or household financial plan used to track income, expenses, and savings goals.

Caps - Limits placed on how much an interest rate can rise for loans with variable rates, like adjustable-rate mortgages.

Cash advance - A short-term loan, often used in emergencies, typically taken against future income like a paycheck. Interest begins accruing immediately.

Charge off - When a lender considers a debt uncollectible and removes it from their books, though the borrower still owes the amount. Often sold to collection agencies.

Checking account - A bank account designed for daily transactions like deposits, withdrawals, and payments via checks or debit cards.

Security or Collateral - Property or assets offered by a borrower to secure a loan. If the loan isn't repaid, the lender can claim the asset.

Compound interest - Interest calculated on the initial principal and also on the accumulated interest from previous periods.

Co-signer - Someone who agrees to be legally responsible for repaying a loan if the primary borrower fails to do so.

Credit - An agreement that allows someone to receive goods, services, or money now and pay for them later.

Credit request - A request for credit given in writing. At times an request fee will be charged in order to cover the cost of processing the loan.

Credit bureau - Companies that collect and maintain credit histories on individuals and provide credit reports to lenders. Major ones include Equifax, TransUnion, and Experian.

Credit card - A plastic or digital card issued by banks allowing users to make purchases on borrowed funds, which must be repaid with interest if not paid in full.

Credit counseling - Services designed to help consumers manage their finances, reduce debt, and improve credit scores.

Credit limit - The maximum amount a borrower is allowed to spend on a credit account.

Credit line - A pre-approved borrowing limit from which funds can be drawn as needed. Once repaid, the funds become available again.

Credit report - A detailed record of an individual's credit history, including payments, current debts, and any bankruptcies or defaults.

Creditor - The person or business to whom money is owed.

Debit card - A card linked to a checking account, used to make purchases or withdraw funds directly from the account balance.

Debt - Money owed to a lender or creditor.

Debt Consolidation - Combining multiple debts into one single payment, often with the goal of simplifying repayment or lowering interest rates.

Default - The failure to meet the terms of a loan agreement, such as missing payments.

Delinquency - A late payment or failure to pay by the agreed-upon due date.

Direct Deposit - An automatic electronic deposit of wages or benefits into a bank account, eliminating the need for paper checks.

Equal Credit Opportunity Act - A federal law ensuring all credit applicants are treated fairly and not discriminated against based on race, gender, age, or other factors.

E-Signature - A legally valid electronic signature used to sign digital documents, made legal under U.S. law in 2000.

The Fair Credit Reporting Act - A law that gives consumers the right to see what's on their credit report and to dispute any incorrect or outdated information.

FDIC or Federal Deposit Insurance Corporation - A government agency that insures deposit accounts (checking, savings, etc.) up to a certain amount per depositor at insured banks.

Finance charge - The total dollar cost of credit, including interest and any additional fees.

A fixed interest rate - An interest rate that remains unchanged over the term of a loan.

Foreclosure - A legal process where a lender takes ownership of a property used as collateral if the borrower fails to repay the mortgage.

Installment loan - A loan repaid over time with a set number of scheduled payments.

Interest - The cost you pay to borrow money, usually expressed as a percentage of the amount borrowed.

Interest rate - The percentage charged by a lender on the amount borrowed, typically shown as an annual rate.

Judgment - A court decision that legally confirms a debt and may allow creditors to collect through legal means.

Late payment fee - An extra charge incurred when a scheduled payment is not received by the due date.

Lease - A contract allowing the use of an asset (such as a car) for a set period in exchange for payment.

Lender or Lending Partner - An individual or financial institution that provides funds to a borrower with the expectation of repayment plus interest.

Liable - Being legally responsible for something, often referring to financial obligations.

Lien - A legal claim against property to secure payment of a debt.

Loan - A sum of money borrowed with the promise to repay, usually with interest.

Loan Agreement - A legal document outlining the terms and conditions of a loan, including repayment and interest rate.

Mortgage loan - A type of loan used to purchase real estate, where the property itself serves as collateral.

Public Record - Information available from government sources that may include bankruptcies, tax liens, and court judgments.

Refinance - Replacing an existing loan with a new one—usually to reduce interest rates or adjust the payment schedule.

Repossess - The act of taking back property (like a vehicle) due to loan default.

Right of recession - The legal right to cancel a loan agreement within three business days of signing.

Savings account - An account where money is stored and earns interest over time, often used for long-term savings.

Secured loan - A loan backed by collateral, such as a home or car, which the lender can claim if the loan is unpaid.

Security - An asset pledged to guarantee repayment of a loan.

Simple interest - Interest calculated only on the principal amount of a loan or deposit.

Title - A document proving legal ownership of property or an asset.

Truth in Lending Act - A law requiring lenders to clearly disclose credit terms, including rates and fees, to borrowers before they agree to a loan.

Unsecured loan - A loan granted without collateral, based solely on a borrower's creditworthiness.

Variable interest rate - An interest rate that can change over time based on economic conditions or market benchmarks.

Yield- The return on an investment, usually expressed as a percentage, such as on savings accounts or bonds.