Financial Terms Glossary
ACH (Automated Clearing House)
A system used to electronically transfer money between bank accounts, commonly for deposits and payments.
APR (Annual Percentage Rate)
The yearly cost of borrowing money, expressed as a percentage. It reflects the total credit cost and may differ from the stated interest rate.
Balance
The amount of money currently available or owed in a bank account.
Bankruptcy
A legal process handled by federal courts in the U.S. that helps individuals who cannot repay debts restructure or eliminate them. Bankruptcy can remain on a credit report for up to ten years.
Budget
A financial plan that helps manage spending and saving.
Caps
Limits placed on how high an interest rate can increase, often used with adjustable-rate loans.
Cash Advance
A short-term loan designed to cover urgent expenses until the next paycheck. Interest usually starts accruing immediately.
Charge-Off
A debt that a lender considers unlikely to be collected. Even after a charge-off, the debt may still be pursued by a collection agency.
Checking Account
A bank account that allows easy access to funds through checks, debit cards, or ATMs.
Collateral (Security)
An asset pledged by a borrower to guarantee repayment of a loan.
Compound Interest
Interest calculated on both the original loan amount and any unpaid interest.
Co-Signer
A person who signs a loan agreement and shares responsibility for repaying the debt.
Credit
An agreement allowing you to receive goods or money now and pay for them later.
Credit Request
A formal application submitted to request a loan or line of credit.
Credit Bureau
An organization that collects and maintains consumer credit information and provides it to lenders. Major bureaus include Experian, TransUnion, and Equifax.
Credit Card
A payment card issued by a financial institution that allows purchases on credit, with interest charged on unpaid balances.
Credit Counseling
Services offered to help consumers manage debt and improve their financial situation.
Credit Limit
The maximum amount that can be borrowed or charged on a credit account.
Credit Line
A flexible loan allowing repeated borrowing up to a set limit, as long as payments are made.
Credit Report
A detailed record of a person's borrowing and repayment history, including late payments and bankruptcies.
Creditor
An individual or business to whom money is owed.
Debit Card
A card linked directly to a checking account, where purchases are deducted immediately.
Debt
Money that is owed to a lender.
Debt Consolidation
A method of combining multiple debts into a single payment, often to simplify repayment.
Default
Failure to meet loan repayment terms.
Delinquency
Missing or being late on required payments.
Direct Deposit
Electronic delivery of funds directly into a bank account.
Equal Credit Opportunity Act
A law that prevents lenders from discriminating against credit applicants.
E-Signature
A legally binding electronic signature used to sign documents digitally.
Fair Credit Reporting Act
A law that gives consumers access to their credit information and the right to dispute errors.
FDIC (Federal Deposit Insurance Corporation)
A government agency that protects bank deposits up to applicable limits.
Finance Charge
The total dollar cost of borrowing money.
Fixed Interest Rate
An interest rate that remains the same throughout the loan term.
Foreclosure
A legal process where pledged property is sold to recover unpaid loan balances.
Installment Loan
A loan repaid through scheduled payments over a fixed period.
Interest
The cost charged by a lender for borrowing money.
Interest Rate
The percentage charged annually on a borrowed amount.
Judgment
A court decision related to a legal dispute over debt or obligations.
Late Payment Fee
A charge applied when a payment is not made on time.
Lease
A contract allowing use of property, such as a vehicle, for a set period in exchange for payment.
Lender or Lending Partner
An organization or individual that provides loans.
Lien
A legal claim placed on property to secure debt repayment.
Loan
Money borrowed that must be repaid with interest.
Loan Agreement
A contract outlining loan terms and conditions.
Mortgage Loan
A loan used to purchase real estate, secured by the property itself.
Public Record
Financial information from official sources, such as court records.
Refinance
Replacing an existing loan with a new one, often to get better terms.
Repossess
Taking back property when loan payments are not made.
Right of Rescission
A borrower's right to cancel a loan agreement within a limited time.
Savings Account
A bank account designed to store money and earn interest.
Secured Loan
A loan backed by collateral such as a home or vehicle.
Simple Interest
Interest calculated only on the original loan balance.
Title
A document proving ownership of property.
Truth in Lending Act
A law requiring lenders to clearly disclose loan costs and terms.
Unsecured Loan
A loan that does not require collateral.
Variable Interest Rate
An interest rate that can change based on market conditions.
Yield
The effective return earned on savings, investments, or accounts.