Annual Percentage Rate (APR)
The cost of credit, expressed as a yearly rate.
Automated Clearing House (ACH)
A method of transferring funds to or from bank accounts.
The amount of money due on an account.
A legal proceeding in U.S. Federal Court, entered into by borrowers who are unable to pay
their debts that allows them to negotiate partial payment or the sale of the borrowers assets
to partially pay back the debt.
A plan for the management of spending and saving of money.
A source of emergency cash for people who are employed but may not have access to
other credit sources. The advance is meant as a "bridge" until their next payday.
A loan or credit card debt written off as uncollectible from the borrower and often the
borrower has sold or assigned the debt to a collection agency. This debt, however, remains
valid and subject to collection.
Money kept in a bank or savings and loan for safekeeping. Money can be easily
withdrawn by writing checks or using an ATM or debit card.
Collateral or Security
An asset pledged to ensure payment of a debt.
A promise to pay at a later date for goods or services purchased today.
A written request for credit, generally in a form specified by the lender.
Sometimes an application fee is charged to cover the cost of loan processing.
A company that compiles credit histories on prospective borrowers and provides credit reports
to lenders. Lenders use these reports when making decisions on extending credit. The three
major credit reporting agencies are Equifax, Experian and TransUnion.
A card issued by a bank authorizing payment for purchases. Interest is charged on the
Professional counseling provided by organizations that help consumers find ways to repay
their credit and get their financial affairs in order through the careful budgeting
and management of money.
The maximum amount of money that may be charged on a credit card account or line of credit.
Credit Line or Personal Line of Credit
The maximum loan amount a consumer can borrow. As a credit line is partially or fully repaid,
the consumer can borrow against the account again.
A record of someone's credit history, including outstanding debts, debt repayments, late
payments and any bankruptcies that is compiled by a credit reporting agency.
A person or business from whom you borrow, or to whom you owe money.
A card issued by a bank, or other financial institution, and used for making purchases. The
purchase amount is deducted directly from your checking account or other accounts.
Money owed to another party.
A strategy sometimes used by consumers to better manage their debt problems. Rather than
paying off several separate bills each month, a consumer consolidates his or her debts with
a financial institution that will arrange for one lower monthly payment extending over a
period of time.
Failure to repay a loan or otherwise meet the terms of a loan agreement.
Failure to make timely payments.
An electronic transfer of funds to a bank account whereby there is no need for a paper check.
Equal Credit Opportunity Act
A federal law prohibiting lenders from discriminating against applicants for credit.
E-Signature or Electronic Signature
Electronic signature software binds your signature, or other mark, to a specific document.
In June 2000, the U.S. government passed the E-sign bill, which gives electronic signatures the
same legality as hand-written ones.
Fair Credit Reporting Act
A federal law giving consumers the right to learn what information credit reporting agencies
have on file about them and to dispute any inaccurate data in the file.
Fair Debt Collections Practices Act
A federal law to protect consumers from any harassing or abusive conduct, the use of false or
misleading representations or unfair practices in the collection of debts.
Federal Deposit Insurance Corporation (FDIC)
A federal agency that insures consumer deposits in a bank or savings and loan for up to
$100,000 per account. Deposits include checking and savings accounts and certificates of
The cost of credit expressed as a dollar amount.
Fixed Interest Rate
An interest rate that does not change over the term of the loan.
A loan in which the amount of payment and the number of payments are predetermined.
The amount a lender charges a customer for borrowing money.
The rate that lenders charge their borrowers for borrowing money. Usually expressed in terms
of percentage per year.
Late Payment Fee
A fee charged for a loan payment not received by the due date.
A person or business who lends or offers loans to customers. Also referred to as a creditor.
Having legal responsibility.
A claim placed by a creditor on a piece of property to ensure the payment of a debt.
An amount borrowed to be repaid at a later date, with interest.
A contract that spells out in detail the terms and conditions of a loan.
Paying off an existing loan with the proceeds from a new loan which is usually done to get
a lower interest rate.
Forced or voluntary surrender of merchandise as a result of a consumer's failure to repay a
loan as promised.
Right of Rescission
A borrower's right to cancel a contract with no cost or penalty (most often,
three calendar days).
A loan in which a borrower pledges an asset such as a home or car that may be sold if the
borrower is unable to repay the loan.
Interest computed on the principal balance outstanding as long as any portion remains unpaid.
A legal document that provides evidence of property ownership.
Truth in Lending Act
A federal law that requires lenders to disclose to the borrower the true cost of a loan,
including the actual interest rate and all terms and conditions of the loan, in a manner that
is easily understood.
A loan granted based only on the borrower's promise to repay and not based off of collateral.
Variable Interest Rate
An interest rate that changes based on an index, such as the prime rate.
The effective rate of return paid on a savings or money market account or bond.