📖 Glossary
500 money, math, and health terms explained in plain English — each with an example and a free calculator.
54 terms found in Loans & Credit. Clear filters
A
Amortization
Amortization is the process of paying off a loan through regular, equal payments over a set period. Each…
APR (Annual Percentage Rate)
APR (annual percentage rate) is the yearly cost of borrowing money, expressed as a percentage. Unlike the…
Auto Loan
An auto loan is a secured loan used to buy a vehicle, with the vehicle itself serving as collateral. The…
B
Balance Transfer
A balance transfer moves debt from one credit card or loan to a different credit card, often one offering a…
Balloon Payment
A balloon payment is a large lump sum due at the end of a loan whose regular payments do not fully repay the…
Buy Now, Pay Later (BNPL)
Buy now, pay later (BNPL) is a form of short-term financing offered at checkout that splits a purchase into…
C
Cash Advance
A credit card cash advance is borrowing cash against a credit card’s limit, for example at an ATM. Cash…
Charge-Off
A charge-off is when a lender writes off a debt as unlikely to be collected, usually after several months of…
Co-Signer
A co-signer is a person who signs a loan alongside the main borrower and agrees to repay it if the borrower…
Collateral
Collateral is an asset a borrower pledges to a lender as security for a loan. If the loan is not repaid as…
Credit Builder Loan
A credit builder loan is a small loan designed to help people establish a credit history. Instead of…
Credit Freeze
A credit freeze, or security freeze, restricts access to your credit report so that most new lenders cannot…
Credit Limit
A credit limit is the maximum amount a lender allows a borrower to owe on a revolving account such as a…
Credit Mix
Credit mix refers to the variety of credit accounts on a credit report, such as revolving credit (credit…
Credit Report
A credit report is a detailed record of a person's borrowing history kept by a credit bureau. It typically…
Credit Score
A credit score is a number that summarizes how reliably a person has handled borrowing, based on the…
Credit Utilization Ratio
Credit utilization ratio is the share of available revolving credit, such as credit card limits, that is…
D
Debt Avalanche Method
The debt avalanche method is a repayment strategy in which a borrower makes minimum payments on all debts and…
Debt Collection
Debt collection is the process of pursuing payment of overdue debts, either by the original lender or by a…
Debt Consolidation
Debt consolidation means combining several debts into a single new loan or account, so that one payment…
Debt Settlement
Debt settlement is an agreement in which a creditor accepts less than the full amount owed to resolve a debt…
Debt Snowball Method
The debt snowball method is a repayment strategy in which a borrower makes minimum payments on all debts and…
Debt-to-Income Ratio (DTI)
Debt-to-income ratio (DTI) compares a person's monthly debt payments with their gross monthly income…
Delinquency
Delinquency is the status of a loan or credit account when a required payment has been missed. It is often…
E
F
FICO Score
A FICO Score is a widely used credit score created by the company FICO. Base FICO Scores range from 300 to…
Flat Interest Rate
A flat interest rate is charged on the full original loan amount for the entire term, even though the…
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I
Installment Loan
An installment loan is a loan repaid through a fixed number of scheduled payments, usually monthly, over a…
Interest Rate
An interest rate is the percentage a lender charges for borrowing money, or the percentage a bank pays on…
Interest-Only Loan
An interest-only loan is a loan in which, for an initial period, the borrower pays only the interest and none…
L
Late Fee
A late fee is a charge applied when a payment is not received by its due date. Credit cards, loans, rent…
Line of Credit
A line of credit is a flexible borrowing arrangement that lets a borrower draw money as needed up to a set…
Loan Default
Loan default is the failure to repay a loan as agreed, usually after a period of missed payments defined in…
Loan Origination Fee
A loan origination fee is a one-time charge a lender collects for processing a new loan, usually expressed as…
Loan Term
A loan term is the length of time over which a loan is scheduled to be repaid, such as 36 months for a car…
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P
Payday Loan
A payday loan is a small, short-term loan, typically due on the borrower’s next payday, usually about two…
Penalty APR
A penalty APR is a higher interest rate a credit card issuer can apply after certain events, most commonly a…
Personal Loan
A personal loan is an installment loan that provides a lump sum repaid in fixed monthly payments over a set…
Prepayment Penalty
A prepayment penalty is a fee some lenders charge when a borrower pays off all or part of a loan earlier than…
Principal
Principal is the original amount of money borrowed on a loan, or the original amount deposited or invested…
R
Reducing Balance Rate
A reducing balance rate (also called a declining balance rate) charges interest only on the loan amount still…
Refinancing
Refinancing means replacing an existing loan with a new loan, usually with a different interest rate, term…
Revolving Credit
Revolving credit is a type of credit that can be borrowed, repaid, and borrowed again up to a set limit, with…
S
Secured Credit Card
A secured credit card is a credit card backed by a cash deposit, which usually becomes the card’s credit…
Secured Loan
A secured loan is a loan backed by collateral — an asset the lender can take if the borrower does not repay…
Simple Interest
Simple interest is interest calculated only on the original principal, never on interest already earned or…
Soft Credit Inquiry
A soft credit inquiry, or soft pull, is a credit check that does not affect credit scores. Examples include…
Student Loan
A student loan is money borrowed to pay for education costs such as tuition, fees, books, and living…
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Definitions are for general educational purposes only and are not financial, tax, legal, or medical advice.