borrowing glossary

Posted : January 30, 2018
Last Updated : January 30, 2018
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borrowing glossary

Annual Percentage Rate (APR): the cost of your loan expressed as a yearly percentage rate

Credit: the ability to borrow money

Collateral: the security you provide the lender

Consumer Installment Loan: a loan used to pay for personal expenses over a set term or period of time

Credit Cards: plastic cards with magnetic strips on the back -- The front displays your account number, name, and bank name. With a credit card, you can buy goods or services and pay for them over time, receiving a bill each month. Credit cards give you the ongoing ability to borrow money for household, family, and other personal expenses.

Fees: the amounts charged by financial institutions for activities such as reviewing your loan application and servicing the account

Fixed Rate: the interest rate stays the same throughout the term of the loan, except in the case of credit cards, where the rate may be changed

Guarantee: a form of collateral -- It occurs when someone you know agrees to be responsible for any money that you owe the lender but haven't paid.

Home Equity Loan: a loan that allows a homeowner to borrow money that's secured by their home

Home Purchase Loan: a loan for the purpose of buying a house -- This loan is secured by the house you're buying.

Home Refinancing Loan: a loan process by which an existing home loan is paid off and replaced with a new loan

Interest: the amount of money a financial institution charges for letting you use its money

Loan: money borrowed on credit

Payday Loan: a short-term loan -- The loan service cashes the check on your payday, at which time your loan is paid in full.

Penalty APR: the terms of your credit card agreement may provide that the creditor will permanently increase the interest rate on your credit card by a large amount if you don’t pay your credit card bill on time, or if you exceed your credit limit

Predatory Lending: use of certain marketing tactics in making loans, such as abusive collection tactics and loan terms, that deceive borrowers into thinking they’re receiving better loan terms than they really are

Refund Anticipation Loans: short-term loans secured by your income tax refund

Rent-to-Own Service: a service that lets you use an item for a period of time by making monthly or weekly payments -- You can opt to purchase the item(s) you’re renting as well, but it's usually much more expensive than purchasing the item(s) outright.

Unsecured Loan: a loan not backed by collateral -- Credit cards are often unsecured loans, although some are secured by a bank account.

Variable Rate: an interest rate that may change during the loan term


Source: PlanningYourDreams.org


 

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borrowing glossary






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