Glossary of Financial Terms
ACH Automatic Clearing House: An electronic network for financial transactions.
APR (Annual Percentage Rate) The annual rate charged for borrowing. It includes interest, fees, and other charges.
Balance The amount of money in a bank account.
Bankruptcy A legal process to relieve debt obligations.
Budget A financial plan outlining income and expenses.
Cap A limit on the interest rate of an adjustable-rate mortgage (ARM).
Cash Advance A short-term loan, often at a high interest rate.
Charge-off A debt that a creditor has written off as uncollectible.
Checking Account A bank account that allows for withdrawals by check or debit card.
Collateral Assets pledged to secure a loan.
Compound Interest Interest calculated on both the principal amount and accumulated interest.
Co-signer A person who shares responsibility for a loan.
Credit The ability to obtain goods or services before payment, based on the trust that payment will be made in the future.
Credit Application A form used to apply for credit.
Credit Bureau A company that collects and reports information about borrowers’ credit history.
Credit Card A plastic card issued by a financial institution that allows users to borrow money up to a certain limit.
Credit Counseling Professional advice and guidance for managing debt and improving credit scores.
Credit Limit The maximum amount a person can borrow on a credit card or line of credit.
Credit Line A line of credit is a type of loan that allows you to borrow money up to a certain limit.
Credit Report A detailed record of a person’s credit history, including payment history, outstanding debts, and public records.
Creditor A person or organization to whom a debt is owed.
Debit Card A plastic card that deducts money directly from a checking account.
Debt Money owed to another person or entity.
Debt Consolidation Combining multiple debts into a single loan.
Default Failure to meet a financial obligation, such as a loan payment.
Delinquency A late payment on a debt.
Direct Deposit Electronic transfer of funds directly into a bank account.
Equal Credit Opportunity Act A federal law that prohibits discrimination in lending practices.
E-Signature An electronic signature that is legally binding.
Fair Credit Reporting Act A federal law that gives consumers the right to access and correct their credit reports.
Fair Debt Collection Practices Act A federal law that regulates debt collection practices.
FDIC (Federal Deposit Insurance Corporation) A U.S. government corporation that insures deposits in banks and savings associations.
Finance Charge The total cost of credit, including interest and fees.
Fixed Interest Rate An interest rate that remains constant throughout the loan term.
Foreclosure A legal process in which a lender takes possession of a property to satisfy a debt.
Installment Loan A loan repaid through a fixed number of payments.
Interest A fee charged by a lender for borrowing money.
Interest Rate The percentage rate charged for borrowing money.
Judgment A court order determining the outcome of a legal case.
Late Payment Fee A fee charged for a late payment.
Lease A contract that allows a person to use an asset for a specific period of time in exchange for payments.
Lender A person or institution that lends money.
Liable Legally responsible.
Lien A legal claim on property to secure a debt.
Loan A sum of money borrowed that must be repaid with interest.
Loan Agreement A legal contract outlining the terms of a loan.
Mortgage Loan A loan secured by real estate.
Public Record Government records, such as court records or bankruptcy filings.
Refinance Replacing an existing loan with a new one, often to obtain a lower interest rate.
Repossession The taking back of property by a lender when a borrower defaults on a loan.
Right of Rescission The right to cancel a loan within a certain period of time.
Savings Account A bank account that earns interest on deposits.
Secured Loan A loan backed by collateral.
Simple Interest Interest calculated only on the principal amount of a loan.
Title A legal document proving ownership of property.
Truth in Lending Act A federal law that requires lenders to disclose the true cost of credit.
Unsecured Loan A loan that is not backed by collateral.
Variable Interest Rate An interest rate that fluctuates over time.
Yield The rate of return on an investment.