Glossary of Terms
Account Number
Every cardholder's account is identified by an account number. Protect it and never give it out over the telephone unless you initiated the call.
Activate
To prevent fraud, many card issuers require you to call them when you receive your new card in the mail to verify that the correct person has received it. Until proper ownership is confirmed, the card may not be activated.
Activity
Activity is any transaction that appears on your bill, including purchases, cash advances, finance charges and fees. It also includes any payments made.
Administration Fee
This is a fee charged by some lenders, which is not refundable if the mortgage application does not proceed. The administration fee will often form part of the valuation fee but will be retained by the lender even if the valuation has not been carried out.
Advance Fee Loan
A loan calculated so that all the finance charges and other creditor expenses are deducted before the consumer receives the principal.
Affinity Card
A card that is offered jointly by two organizations; one is a credit card issuer and the other is a professional association, special interest group or other non-bank company that offer the Affinity Card.
Agreement
Your card issuer will send you a cardholder agreement that describes the terms that apply to your card, including the interest rate charged, method of calculating interest and any transaction fees. If your card issuer refuses to disclose fully the terms of your card agreement before you accept the card, you might want to shop around for an issuer that will.
Amortization
The process of fully paying off indebtedness by installments of principal and earned interest over a definite time.
Amount Due
Generally, the minimum monthly payment you must make, not the total amount you owe.
Annual Fee
A yearly fee charged to the card for keeping the account open. Some cards have this annual fee and some do not.
Annual Percentage Rate
The cost of carrying a balance on a loan expressed as an annual percentage. To calculate the amount owed in interest each month divide the APR by 12. For example, if the APR is 18% the monthly rate is 1.5%.
Annual Review
The interest you pay changes annually. The change is based on an average calculation of the previous year's base rate.
Applicant
An applicant is a person applying for credit privileges, employment or some other benefit.
Appraisal Fee
The charge for estimating the value of property offered as security.
Appreciation
An increase in the market value of a home due to changing market conditions and/or home improvements.
Arrangement Fee
This is a fee charged by some lenders in order to access particular mortgage deals. Arrangement fees particularly apply if you are looking for a fixed rate or discounted rate mortgage and these may either be payable up front, added to the loan on completion, or deducted from the loan on completion (check with the chosen lender which situation applies).
Arrears
Contracted mortgage payment not made by the due date. Applicants who have arrears on a current mortgage may experience problems if attempting to arrange a new mortgage through the mainstream lenders. A number of lenders do, however, specialize in this area of the market.
Asset
Anything owned by an individual that has a cash value. This includes property, goods, savings or investments.
Asu
Accident, sickness and unemployment insurance (sometimes referred to as A.S.R. - accident, sickness and redundancy insurance). This is an insurance policy, which is taken out by the borrower and protects against the borrower being unable to work for the stated reasons. The ASU policy will usually pay a percentage of the normal monthly mortgage repayment (plus insurance) if the borrower is unable to work due to accident/sickness or unemployment/redundancy. These payments will normally only be made for a limited period of time - typically 6/12 months or until the borrower returns to work. The terms of these policies and the cost vary considerably from company to company.
Atm
Automated teller machine. ATMs offer consumers convenient access to fund withdrawals, deposits, transfers and balance inquiries. Some banks charge ATM fees, depending on where the funds are drawn. Some ATM transactions involve fees from more than one bank.
Authorization
Every shop has a different limit for the amount of money you can spend on a card in the shop without it being checked first with the issuer. When you buy things, which are more than this limit, the sale has to have the card issuer's authorization. This can either be done by telephone or electronically when the card is swiped through the till by the shop assistant. In this way, stolen cards are caught and cardholders are stopped from going over their credit limit. Sometimes to authorize the transaction, the issuer needs to check the cardholder's identity.
Authorized Account User
The person authorized by the contractually responsible party to use the account.
Automatic Payment
If you have a savings or checking account with the same bank that issues your card, you may be able to automatically transfer money from your bank account to pay a credit card bill. Automatic payment eliminates the risk of paying a bill late and being assessed a late charge.
Available Credit
The unused portion of credit that falls within the consumer's applicable credit limit, if any.
Average Daily Balance
The average daily balance is a method used to calculate finance charges. It is calculated by adding the outstanding balance on each day in the billing period, and dividing that total by the number of days in the billing period. The calculation includes new purchases and payments.
B Or C Loans
The credit industry term used to describe loans that reflect less than the best possible interest rate, terms and conditions. Consumers with negative or derogatory credit may be offered "B" or "C" loans. These loans always impose a higher interest rate and fees.
Bad Credit
A term used to describe a poor credit rating. Common practices that can damage a credit rating include making late payments, skipping payments, exceeding card limits or declaring bankruptcy. "bad credit" can result in being denied credit. If you have credit repair questions and want to repair your bad credit try Lexington Law.
Balance Transfer
Moving a balance (debt) from one credit card to another. This is often done with special checks or forms, or may be offered as an option on some credit card applications. The usual reason for a balance transfer is to shift an ongoing debt to an account with a lower interest rate.
Balance
The total amount of money owed. It includes any unpaid balance from the previous month, new purchases, cash advances, and any charges such as an annual fee, late fee or interest. The balance should not be confused with the monthly payment (the minimum payment allowed each month), which is generally 2% - 5% for revolving credit cards.
Balloon Payment
A large extra payment that may be charged at the end of a loan or lease.
Bankruptcy Discharged
A court order terminating bankruptcy proceedings on old debts.
Bankruptcy Dismissed
A court order that denied one's bankruptcy petition making the debtor still liable for all debt.
Bankruptcy
bankruptcy is a legal declaration of the inability to repay debts. bankruptcy should be viewed as a last resort. It will have a severe impact on a credit rating and will remain on a credit report for ten years. Furthermore, bankruptcy is not a solution in all cases. Federal student loans, Federal tax debt and child support are all exempt from bankruptcy protection. bankruptcy agreements vary but there are two types of agreements that most people choose: Chapter 7 and Chapter 13.
Bill
Each billing cycle (usually once per month) your card issuer will send you a bill. The bill will detail the activity on your account for that billing cycle. The reverse side of your bill usually describes some of the basic terms of your card agreement, including how the interest is calculated and where to call with questions. See your card agreement for complete information on the terms.
Billing Cycle
The number of days between statement dates. This is generally about 25 days.
Borrower
A person or entity using someone else's money or funds to purchase something. May be used interchangeably with the term debtor.
Budget Cards
Budget cards work like a credit card, except for the credit limit. You agree with the issuer to pay a set amount each month by direct debit. The credit limit is a multiple of the pre-set amount you have agreed.
Budget Insurance
Lenders may insist that you take out this cover. It protects you and the lender in case the building falls down or is fundamentally damaged. Most lenders will offer this as part of the mortgage, but you are not required to take it from them.
Budget
A financial plan for saving and spending money. An itemized list of all expenses. Budgets are tools commonly used to measure or gauge expenses against income.
Buy Down
A lump sum payment made to the creditor by the borrower or by a third party to reduce the amount of some or all of the consumer's periodic payments to repay the indebtedness.
Capacity
The ability to make mortgage payments on time, depending on income and income stability, assets, reserves and the amount of income each month that is available after paying housing costs, debts and other obligations.
Capital
The cash reserves (savings), investments or assets possessed by an individual.
Cardholder
Most issuers allow you to sign on an additional cardholder, such as a spouse, to your account. You are liable for any charges that the additional cardholder incurs.
Cash Advance
You can use your card at a bank or an automatic teller machine to get a cash loan. The interest rate for a cash advance is typically higher than it is for purchases, and there is usually no grace period. There can also be a handling fee for withdrawing cash in addition to the interest charges, which can raise the cost significantly.
Cash Back Mortgage
This is the arrangement whereby a cash sum of money is repaid to the borrower at the start of the mortgage. The amount of the cash back will vary considerably from lender to lender with the highest amounts being paid where the borrower is willing to forego any fixed or discounted rate offers and pay the normal variable mortgage rate. Cash back deals are also available in conjunction with some fixed or discounted rates but the amount of the cash back will normally be reduced in these circumstances. If a large cash back is being considered then it could, in some circumstances, be liable to Capital Gains Tax (refer to the lender, your accountant or local tax office for clarification). The lender will normally impose early redemption penalties if the mortgage is redeemed within the first few years (see Redemption Penalties).
Cash Back
A cash reward paid for using the card. Issuers pay back a percentage of the amount spent on the card either at the end of the month or at the end of the year.
Cccs
Organizations, which help consumers, find a way to repay debts through careful budgeting and management of funds. These are usually nonprofit organizations, funded by creditors. By requesting that creditors accept a longer pay-off period, the counseling services can often work out a successful repayment plan.
Charge Card
A card, which requires payment in full upon receipt of the statement.
Charge Off
Accounting term to indicate that the creditor does not expect to collect a balance owing on an account.
Closed End Credit
Generally, any loan or credit sale agreement in which the amounts advanced, plus any finance charges, are expected to be repaid in full over a definite time. Most real estate and automobile loans are closed- end agreements.
Closing Date
The closing date is the last day that transactions are posted on your account for that month.
Co Sign
To sign a credit agreement with someone and agree to share the debt with that person or assume the debt if the other person defaults, that is, doesn't pay.
Co Signed Account
A loan or credit account cosigned by an individual who pledges to pay if the primary borrower does not pay.
Co Signer
Another person who signs for a loan and assumes equal liability for it.
Collateral
Property that is offered to secure a loan or other credit and that becomes subject to seizure on default.
Collection Account
Refers to the status of an account owed to a creditor when it has been transferred from a routine debt to a Collection Department of the creditor's firm or to a separate professional debt-collecting firm.
Compensating Factors
The term used by lenders for examining a borrower's credit strengths and weaknesses. If a borrower is exceptionally strong in one area, such as cash reserves, the borrower may be weaker in another area, such as late payments in the credit history. In this case, the cash reserves may compensate or make up for the derogatory credit.
Consolidation Loan
A loan usually obtained for the purpose of reducing the amount of the payments of bills owing by consolidating the bills into one loan payment. The consumer pays off several bills with the proceeds from one loan and is left with one consolidated monthly payment.
Consumer
Person who uses and/or buys goods and services for family or personal use.
Convenience Check
When you open a new account with a credit card issuer, it may send you a blank convenience check or transfer check so you can shift the debt you have with your old card to your new card.
Copy Charge
Card issuers are required to provide you with copies of documents relating to your account. They may, however, charge a fee for the copying and handling. See your cardholder agreement for your issuer's copy charges.
Cra
Encourages banks to help meet the credit needs of their communities for housing and other purposes, particularly in neighborhoods with low or moderate incomes, while maintaining safe and sound operations.
Credit Bureau
Sign up now to receive a free phone counseltation with a Lexington Law credit specialist. This is a one-time, no obligation phone call that will focus in on your credit problems, and give you real world solutions that can get your credit back on track.
To sign up, fill out the form to the left and click the submit button. It's as easy as that! A credit specialist will get a hold of you within the time frame specified.
Credit Card
Any card, plate, or coupon book that may be used repeatedly to borrow money or buy goods and services on credit.
Credit Grantor
Person or business furnishing consumer goods and/or services on credit.
Credit Limit
The maximum amount of money you can charge on a particular credit account.
Credit Record
A person's up-to-date credit history.
Credit Report
A record or file to a prospective lender or employer on the credit standing of a prospective borrower, used to help determine credit worthiness.
Credit Reporting Agency
A company that gathers files and sells information to creditors and/or employers, to facilitate their decisions to extend credit or to hire.
Credit Risk
The credit industry term meaning the level of risk or likelihood of future default by an individual borrower.
Credit Score
A computer-generated number, based on a statistical model, that summarizes an individual's credit record and predicts the likelihood that a borrower will repay future obligations.
Credit Scoring System
A statistical system used to determine whether or not to grant credit by assigning numerical scores to various characteristics related to creditworthiness.
Credit Union
A democratically owned and controlled nonprofit financial cooperative that offers a variety of savings and lending services to members.
Credit
The promise to pay in the future in order to buy or borrow in the present. The right to defer payment of debt.
Creditor
The person or entity providing credit or a loan to a borrower at specific terms and conditions. May be used interchangeably with the term lender.
Creditworthiness
A creditor's measure of a consumer's past and future ability and willingness to repay debts.
Daily Periodic Rate
The daily periodic rate is your annual interest rate expressed on a daily basis. It equals 1/365th of your annual percentage rate.
Debit Card
Purchases are deducted directly from the consumer's personal checking account.
Debt
A sum of money owed from one person or institution to another person or institution.
Debtor
The person or entity that borrows money. The term debtor may be used interchangeably with the term borrower.
Default
Failure to meet the terms of a credit agreement.
Deferred Payment
Payment put off to a future date or extended over a period of time. Watch out for skip-a-month offers. Interest still accumulates when you skip a month.
Delinquency Assessment
A fee that is charged for a late payment.
Discount
An amount deducted from the regular price for those who purchase with cash instead of credit.
Dispute
The Fair Credit Billing Act governs Credit and charge card bills, in the United States, which is included in the Truth in Lending Act. If you think your bill is wrong, write to your card issuer at the address listed on your statement. You must write no later than 60 days after receiving the first statement where the error appeared. The card issuer must acknowledge your letter within 30 days, and correct the error or explain why it thinks the statement was correct, within two billing cycles (but in no event later than 90 days) after receipt of your letter. You do not have to pay the amount in question while the dispute is being investigated, but you must pay the rest of your bill.
Due Date
The day a payment is due to a creditor. After that date, a late fee can be charged and the payment can be recorded as late, or the account can be considered delinquent.
Ecoa
A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.
Effective Date
The first day your card is activated and ready for use or when new terms take effect.
Equifax
One of the three major credit reporting agencies; headquartered in Atlanta, Georgia.
To opt out of pre-approval credit cards call:
1-800-567-8688 (equifax)
1-800-353-0809 (Experian)
1-800-680-7293 (TransUnion)
Experian
One of the three major credit reporting agencies, formerly known as TRW.
To opt out of pre-approval credit cards call:
1-800-567-8688 (equifax)
1-800-353-0809 (Experian)
1-800-680-7293 (TransUnion)
Fcra
A federal law, established in 1971, and revised in 1997, which enables consumers to learn what information Credit Reporting Agencies have on file about them, and to dispute inaccurate data in the file. The Fair Credit Reporting Act also establishes specific permissible purposes for which credit reports may be requested, and places time limits on how long adverse information may be reported.
Federal Reserve
A central bank that monitors and influences the total supply of money and credit through its 12 regional offices. The Federal Reserve Board sets interest rates, maintains the flow of cash to local and regional banks, clears checks, provides deposit insurance, and helps guarantee the stability and security of the U.S. banking system.
Finance Charge
The total dollar amount paid to get credit.
Finance Company
A business that makes consumer loans, often to consumers who cannot qualify for credit at a credit union or bank. Typically, the interest rates charged by a finance company are higher than those charged by other creditors.
Fixed Expense
Costs or payments that generally do not vary from month to month (for example, a mortgage payment is a fixed expense).
Fixed Rate
A traditional approach to determining the finance charge payable on an extension of credit. A predetermined and certain fixed rate of interest is applied to the principal.
Foreclosure
A legal action that terminates all ownership rights in a home when the homebuyer fails to make the mortgage payments or is otherwise in default under the terms of the mortgage.
Garnishment
Legal process whereas a creditor has obtained judgment on a debt may obtain full or partial payment by seizure of a portion of a debtor's assets (wages, bank account, etc...).
Glossary Of Terms
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Good Credit
The term commonly used to mean that one's credit has been handled responsibly and that payments have been made on time.
Goods Services Dispute
If you have a problem with the quality of property or services that you purchase with a charge or credit card, and you have tried in good faith to correct the problem with the merchant, you may have the right not to pay the remaining amount due on the property or services. There are two limitations on this right: 1) You must have made the purchase in your home state or, if not within your home state, within 100 miles of your current mailing address, and 2) the purchase price must have been more than $50.
Grace Period
The period allowed to avoid any finance charges by paying off the balance in full before the due date.
Graduated Payment
Repayment terms calling for gradual increases in the payments on a closed-end obligation. A graduated payment loan usually involves negative amortization.
Gross Income
The income earned before taxes and other deductions. Under certain circumstances, gross income also may include rental income, self-employed income, income from alimony, child support, public assistance payments and retirement benefits.
Home Equity Loan
A loan based on the difference of the amount you own on your home, and the home's current market value.
Inquiry
A request for a copy of a credit report. An inquiry occurs every time a credit application is completed and when more credit is requested. In some cases, too many inquiries on a credit report can lower a credit score.
Installment Account
A type of credit where a consumer signs a contract to repay a fixed amount in equal payments over a specific period of time. Examples include car loans, furniture loans and personal loans.
Installment Credit
A credit agreement that allows you to repay credit in regular payments over a specified time.
Installment Loan
A credit account in which the amount of the payment and the number of payments are predetermined or fixed.
Interest
The cost of borrowing or lending money, usually a percentage of the amount borrowed or loaned.
Joint Accounts
Credit accounts held or owned by two or more persons. In the case of a joint account, all parties are held equally responsible and liable for payment under the terms and conditions of the loan contract.
Judgment
The official court decision of an action or suit. This public record may be listed on your credit report in matters of money and debts owed.
Late Payments
Loan or credit payments that do not reach the lender or creditor on or before the payment due date. The indication of late payments on a credit report are very damaging to an individual's credit report.
Lease
A written document containing the conditions under which the possession and use of real and/or personal property are given by the owner to another for a stated period and for a stated consideration.
Lender
The person or entity providing credit or a loan to a borrower at specific terms and conditions. May be used interchangeably with the term creditor.
Liability
Liability refers to the responsibility for charges to an account. Generally, a cardholder agrees to be liable for any charges to his or her account, including purchases, fees and finance charges. If the cardholder allows someone else to make charges to his or her account (through, for example, an additional card), the cardholder is still responsible for paying the bill. Two people who apply for a card together may both be responsible for the entire balance. Your liability is described in the cardholder agreement you receive from the issuer. Be sure to read it carefully.
Lien Waiver
A document that releases a consumer (homeowner) from any further obligation for payment of a debt once it has been paid in full. Lien waivers typically are used by homeowners who hire a contractor to provide work and materials to prevent any subcontractors or suppliers of materials from filing a lien against the homeowner for nonpayment.
Lien
A legal hold or claim of one person on the property of another as security for a debt or charge. The right given by law to satisfy debt.
Line Of Credit
A preauthorized amount of credit offered to an individual, business or institution that is commonly secured against an asset such as a home (real estate).
Minimum Payment
The minimum amount you are required to pay the credit card issuer each month. You may, however, choose to pay more. Paying the minimum monthly payment may be helpful when you can only afford to make a small payment. However, interest charges can really add up when you stretch out a loan with minimum payments.
Monthly Periodic Rate
The rate of interest per month, calculated by dividing the annual percentage rate (APR) by 12.
Mortgage Insurance Premium
The cost of the insurance provided to lenders by the Federal Housing Administration (FHA), which is paid by the individual homebuyer. MIP is made up of two parts: an up-front cost of 1.5% of the mortgage amount, plus an annual premium of 0.5% of the loan amount to be paid on a monthly basis. Mortgage insurance helps to protect lenders from losses in the event of a mortgage default and foreclosure. The annual MIP may be canceled when the mortgage amount is reduced to 78% or less of the property value (also known as 22% or more of home equity value).
Mortgage Insurance
Insurance needed for mortgages with low down payments (usually less than 20% of the price of the home).
Mortgage Qualifying Ratio
Used to calculate the maximum amount of funds that an individual traditionally may be able to afford. A typical mortgage qualifying ratio is 28: 36.
Mortgage
A lien or claim against real property given by the buyer to the lender as security for money borrowed. First Mortgage-or "primary" mortgage-has priority over the claims of subsequent lenders for the same property. 2nd Mortgage or "secondary" mortgage-is a loan secured by mortgage or trust deed, which lien is "junior" to another mortgage or trust.
Negative Amortization
Repayment schedule calling for periodic payments that are insufficient to fully amortize the loan. Earned but unpaid interest is added to the principal, increasing the debt. Eventually, payments must be rescheduled to fully pay off the debt.
Net Income
Your take-home pay after taxes and other deductions. It is the amount of money that you actually received in your paycheck.
Open End Account
A type of credit where a consumer promises to repay the full balance owed each month. Examples include local businesses, travel and entertainment charge cards.
Open End Credit
A line of credit that may be used repeatedly up to a certain limit, also called a charge account or revolving credit.
Open End Lease
A lease that may involve a balloon payment based on the value of the property when it is returned.
Other Charges
Other charges may be listed on your bill and can include the annual membership fee or late payment fees.
Over Limit Fee
When you charge more than your credit limit allows, you may be charged an over-the-limit, or over-credit-limit, fee. Your card issuer may allow you to exceed your credit limit without telling you in advance, and you may not know you have done so until you receive your bill.
Overdraft Agreement
Some issuers allow you to link your credit card to a checking or savings account that you hold with that bank. When you sign an overdraft agreement and you bounce a check, the bank can charge that amount to your credit card account and the check will clear. This way, you avoid a returned-check fee.
Overdraft Checking Account
A checking account associated with a line of credit that allows a person to write checks for more than the actual balance in the overdraft checking account, with a finance charge on the overdraft.
Partial Payment
Paying less than the full amount due.
Past Due
When you do not make at least the minimum payment on time, your account is considered past due.
Payment Due Date
Contract language specifying when payments are due on money borrowed. The payment due date is always indicated and means that the payment must be received on or before the specified date. Grace periods do not eliminate the responsibility of making sure that the lender receives payments by the due date. In most cases, lenders or creditors who receive payments past the due date will add a late charge and/or additional interest and fees.
Periodic Rate
The interest rate described in relation to a specific amount of time. For example, the monthly periodic rate is the cost of credit per month; the daily periodic rate is the cost of credit per day.
Permissible Purposes
As defined in section 604 of the Fair Credit Reporting Act, only the named reasons for requesting a credit report are deemed "permissible". Requests not meeting these criteria must be denied.
Personal Line Credit
The maximum amount you can owe at any time, based on your income, debt and your credit history.
Personal Loan
A loan based on your income, debt and credit history.
Pin
Personal Identification Number used for security purposes on bank cards (also known as debit cards or check cards) and credit cards. The rightful owner is required to select and memorize a four- or five-digit numeric code, which is required to use the card at ATMs or other points of sale.
Piti
Principal, Interest, Taxes and Insurance combined to make up a mortgage payment.
Points
Finance charges paid by the borrower at the beginning of a loan in addition to monthly interest; each point equals one percent of the loan amount.
Posting Date
The date that a transaction is recorded on your account. Some companies assess interest on charges and cash advances from the transaction date, others from the posting date. It is more favorable to assess interest from the posting date, because that may be later, giving you some interest-free days.
Predatory Lending
Abusive lending practices that include making a mortgage loan to an individual who does not have the income to repay it or repeatedly refinancing a loan, charging high points and fees each time and "packing" credit insurance onto a loan.
Predictive Variables
The items that are part of the formula or factors comprising elements of a credit-scoring model. These variables are used to predict a borrower's future credit performance.
Prepayment Penalty Mortgage
A type of mortgage that requires that the borrower pay a prepayment penalty or a fee for repaying the entire loan (or a substantial portion of it) within a certain time period. A "substantial payment" is generally defined as any amount that exceeds 20% of the original principal balance.
Prepayment Penalty
Charges imposed by some lenders as a penalty for paying off a loan earlier than its original payoff date. Prepayment penalties are common among some of the sub-prime and/or predatory lending loan products
Previous Balance
The amount you still owe after last month's payments and charges were added to your balance.
Prime Rate
The interest rate banks charge for loans to their biggest and highest-rated customers. The prime rate changes based on the demand for money and the rate the U.S. Federal Reserve Bank charges to its member banks. It is used as a major economic indicator.
Principal
The outstanding balance of a loan, exclusive of interest and other charges.
Private Mortgage Insurance
Refer to mortgage insurance.
Promotional
An interest rate that applies for a limited amount of time. After the time limit expires, the ongoing rate (which is usually higher) is applied to your outstanding balance. Check both rates when deciding which card offers the most value.
Public Record
Information obtained by the Credit Reporting Agency from court records, such as liens, bankruptcy filings and judgments. Public records are open to any person who requests to see them.
Rebate Cards
Some cards include rebates on merchandise or cash-back offers depending on how much you charge annually. Others have enhancements that offer special benefits, such as frequent-flier miles or long-distance telephone discounts. When choosing a rebate card, be sure that the rebates the card provides add up to more than what you might save with a lower interest rate card.
Renegotiable Rate
A type of variable rate involving a renewable short- term "balloon" note. The interest rate on the loan is generally fixed during the term of the note, but when the balloon comes due, the lender may refinance it at a higher rate. In order for the loan to be fully amortized, periodic refinancing may be necessary.
Repossession
Forced, or voluntary surrender of merchandise as a result of the customer's failure to pay as promised. There are several types and descriptions of repossession actions.
Revolving Account
An account, which requires at least a specified minimum payment, each month plus a service charge on the balance. As the balance declines, the amount of the service charge, or interest, also declines.
Revolving Credit
A credit agreement that allows consumers to pay all or part of the outstanding balance on a loan or credit card. As credit is paid off, it becomes available again to use for another purchase or cash advance.
Risk Based Pricing
Fee structure used by creditors based on the risks of extending credit to a borrower with a poor credit history.
Savings
Money set aside into an interest bearing or investment account. Also defined as the difference between net income and expenses.
Secured Credit Card
A credit card secured by a savings account that has been established in advance by the borrower. The amount in the account usually determines the limit on the credit card. These accounts present no real risk factor for creditors and are therefore much easier to obtain.
Secured Loan
A loan backed by collateral and secured against something tangible such as a home (real estate).
Security Interest
The creditor's right to take property or a portion of property offered as security.
Sellers Points
A lump sum paid by the seller to the buyer's creditor to reduce the cost of the loan to the buyer. This payment is either required by the creditor or volunteered by the seller, usually in a loan to buy real estate. Generally, one point equals one percent of the loan amount.
Service Charge
A component of some finance charges, such as the fee for triggering an overdraft checking account into use.
Set Protocol
Secure electronic transaction protocol, an encryption technology designed to allow secure electronic transactions between card issuers, merchants and consumers. Unsecured information sent over the Internet can be intercepted. When making purchases online, you should consider a secure browser that complies with industry standards, such as secure sockets layer (SSL) or secure hypertext transfer protocol (S-HTTP). These often are included with Internet connection services.
Smart Card
An electronic prepaid cash card, usually sold at banks and are exchanged at face value.
Statement Date
The date on which a statement is generated, and the month's finance charges (interest) are added to the balance.
Statement
The monthly bill from a credit card issuer that describes and summarizes the activity on an account. A statement includes the outstanding balance, purchases, payments, credits, finance charges and other transactions for the month.
Status
A credit report will describe the status of your accounts -- the type of account (charge, credit or installment loan) and whether your account has been paid on time, is past due or canceled.
Stored Value Card
An information storage card that contains stored value, which the user can "spend" in a pay phone, retail, vending or related transaction.
Sub Prime
Industry term used to describe credit and loan products that have less stringent lending and underwriting (loan approval) terms and conditions. As a compensating factor for the higher risk, however, sub-prime products charge consumers higher interest rates and fees.
Surcharge
An extra charge imposed on those who purchase with a credit card instead of cash. (Currently, surcharges for credit card purchases are prohibited.)
Terms
The period of time and the interest rate agreed between the creditor and the debtor to repay a loan.
Three Cs
Capacity, collateral and credit. The term for the three primary areas used by lenders to measure creditworthiness.
Trans Union
One of the three major Credit Reporting Agencies.
To opt out of pre-approval credit cards call:
1-800-567-8688 (equifax)
1-800-353-0809 (Experian)
1-800-680-7293 (TransUnion)
Transaction Date
The date a purchase is made or cash is withdrawn. Some companies assess interest on charges and cash advances from the transaction date, others from the posting date.
Transaction Fee
A fee that is charged each time certain transactions take place, for example, cash advances.
Truth Lending Act
The Truth in Lending Act seeks to tell U.S. consumers important information about credit terms that can help them make informed credit choices and should protect them against inaccurate and unfair billing practices. The Truth in Lending Act was amended by, and includes, the Fair Credit Billing Act.
Unsecured Loan
A loan based on a consumer's promise to pay, without savings or other collateral as a guarantee. Sometimes called a signature loan.
Unused Credit
The amount of credit you have available before you reach your credit limit.
Variable Expenses
Costs or payments that may vary from month to month (for example, grocery bills).
Variable Rate
A variable rate agreement, as distinguished from a fixed rate agreement, calls for an interest rate that may fluctuate over the life of the loan. The rate is often tied to an index that reflects changes in market rates of interest. A fluctuation in the rate causes changes in either the payments or the length of the loan term. Limits are often placed on the degree to which the interest rate or the payments can vary.
Wraparound
A financing device that permits an existing loan to be refinanced and new money to be advanced at an interest rate between the rate charged on the old loan and the current market interest rate. The creditor combines or "wraps" the remainder of the old loan with the new loan at the intermediate rate.
Zero Balance
If you have no previous outstanding balances on your card account and no new activity that month, this means that you have a zero balance. You might not get a bill since you do not owe anything.
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