Glossary

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Glossary

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Annual Percentage Rate (APR)
The APR is the cost of your loan expressed as a yearly percentage rate. The law requires that the APR appear in 18-point font on most credit card applications so that it is easily seen.

Asset
An asset is something valuable that you own.


Balance
The amount of money you have in the bank at any given time.

Bankruptcy
Bankruptcy is a legal declaration of insolvency. Bankruptcy will not fix credit record problems and will be part of your credit history for 10 years. A new law now requires that you get credit counseling before you can file for bankruptcy.

Budget
A budget is a step-by-step plan for meeting expenses in a given period of time.


Car Lease
A car lease is an agreement between you and the car dealer, manufacturer, or other company that allows you to essentially rent the car for a period of time. You make monthly payments, but the car does not belong to you. If you are allowed to end the lease early, you will likely pay substantial penalties or other fees. When the lease ends, you have to return the car to the dealership.

Car Title
This is a legal document that indicates who owns the car. The bank that lends you the money to pay for the car keeps the title until you pay off the loan.

Collateral
One of the Four Cs of loan-decision making, collateral is security you provide the lender. Giving the lender collateral means that you pledge an asset that you own, such as your home, to the lender with the agreement that it will be the repayment source in case you cannot repay the loan.

Credit
Credit is money you borrow to pay for things. It is usually referred to as a loan. You make a promise to pay back the money you borrowed plus some extra. The extra amount is part of the cost of borrowing money.

Credit Card Fees
Following are the most common credit card fees. There might be others. Be sure to read the disclosures with your credit card agreement.

  • Annual fee. Some companies charge annual fees for the privilege of using their credit cards. Most cards that offer rewards (for example, airline miles or travel awards) charge a yearly fee.
  • Balance transfer fee. You might be charged for moving balances from one credit card to another. This fee is usually a percentage of the balance transferred. It might have a minimum and a maximum limit.
  • Cash advance fee. When you access cash through an automated teller machine (ATM) or bank teller using your credit card, you are usually charged a transaction fee. The transaction fee is usually a percentage of the advance. The advance also often carries a higher interest rate than regular purchases, and there usually is no grace period so interest begins accruing immediately.
  • Late fee. Payment must be received – not postmarked – on the due date to avoid a late fee. If you are mailing a payment, send it five days before it is due to avoid a late fee. A typical charge is $29 per late payment, and late payments may negatively impact your credit rating.
  • Over-the-limit fee. This fee is applied if your outstanding charges exceed your credit limit. The fee is typically $20.

Credit Limit
The maximum amount of money you can spend or charge on a particular credit account.


Electronic Bill Pay
Electronic bill pay is a service that automatically takes money from your account each month to pay your bills. For example, if you have a monthly car insurance payment, you can sign up to have it deducted each month.

Equity
Equity is the value of the home minus the debt, usually in the form of a home loan.

Escrow
A separate account where taxes and insurance are held to be paid to the tax authority or insurance company.

Expenses
Items that you must pay for, like housing, food, transportation, utilities, loans, or other bills are considered expenses.


Fees
Financial institutions charge different fees for different services. For example, you might be charged a monthly maintenance fee for keeping your account open. In addition, you might also be charged a penalty fee if you misuse your account, for example, by bouncing a check.

Fee schedule
A bank document that lists the fees you might be charged for certain activities related to a checking account. Some of the most common fees include a monthly service fee, an ATM user fee, an overdraft fee, and a stop-payment fee. You can use the fee schedule to compare the costs of checking accounts at different banks.

Finance Charge
The finance charge is the dollar amount the loan will cost you. It includes items such as interest, service charges, and loan fees.

Fixed Expenses
Expenses that do not change from month to month are fixed.

Foreclosure
Foreclosure is a legal proceeding initiated by a creditor to take possession of collateral that secured a defaulted loan.


Garnishment
Garnishment is a process granted by a court order by which a lender obtains directly from a third party, such as an employer, part of an employee's salary to satisfy an unpaid debt. Part of the employee's salary is taken out in each pay period until the debt is fully paid.

Gross Income
The total amount of money you earn, before anything is taken out, is called gross income.


Interest
The cost of borrowing or lending money, usually a percentage of the amount borrowed or loaned

Income
Money that comes to you from wages, interest, Social Security, tips, or other sources is considered income.

Installment Loan
This is a loan that is repaid in equal monthly payments, or installments, for a specific period of time, usually several years.


Judgment
A court order requiring a debtor to pay money to the creditor. The judgment places a security lien on the debtor's property until the judgment is satisfied (the debt is repaid).


Late Fee
Additional money that the creditor bills you when you don’t pay the minimum payment by the scheduled due date on the statement or pay after the scheduled due date.

Lien
A lien is a creditor's claim against property to secure repayment of a debt.


Minimum Payment
The minimum payment is the minimum dollar amount that must be paid each month. This is usually 2 to 3 percent of the amount owed and is often based on the balance at the billing date.

Mortgage
A loan or amount of money provided by a financial institution, to buy a house.


Net Income
The amount of money you have left after taxes, insurance, social security, or other expenses are deducted from your gross pay is net income.


Overdraft
A withdrawal of more money than you have available in your account.

Over Limit Fee
Additional money that you pay when you exceed your credit line.


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 do not pay your credit card bill on time. This is called the penalty APR.

Periodic Rate
The periodic rate is an interest rate applied to your balance to calculate the finance charge. For example, the monthly periodic rate for a card with an 18 percent APR is 1.5 percent (18 percent divided by 12 months). If your monthly balance were $1,000, you would multiply it by 1.5 percent to get your monthly finance charge of $15 ($1,000 x 1.5% = $15). The daily periodic rate for the same 18 percent APR is 0.04932 percent (18% divided by 365 days).

Proposal

  • Accepted/Active – Proposal has been accepted and is being paid under terms of agreement.
  • Closed – Account has been completely removed from the program. No further activity, including payments or inquiries will take place on this account.
  • Counter Offer – Proposal was retuned unaccepted with creditor requesting additional funds, awaiting authorization from client for increase.
  • New Proposal Sent – Client accepted the counter offer. Newly revised proposal sent.
  • Open – Proposal sent to creditor, pending acceptance.
  • Pain In Full – Clients account has been verified to be paid in full (PIF).
  • Pending – Proposal sent to creditor; pending acceptance.
  • Rejected – Proposal was returned unaccepted. The following are possible reasons:
    • Invalid Account number
    • Invalid name on account
    • Account open less than 9 months to 1 year
    • Balance transfers less than 9 months to 1 year
    • Account was on or removed from a debt management plan within the past 12 months

Principle
Principal is the total dollar amount of purchases made on a credit card, or the balance remaining on a loan, not including interest or other fees.

Private Mortgage Insurance (PMI)


Repossession
Repossession is the seizure of collateral that secured a loan in default.


Secured Debt
A secured debt is a loan where the creditor retains collateral such as a house, or an automobile. If you fall behind with payments on this type of debt, the lender has the ability to repossess the property in order to mitigate their damages.

Signature Card
A signature card is a form you complete and sign when you open an account. This is the contract that identifies you as the owner of the account. Your signature is used to verify your signature on checks and withdrawals. Signing the signature card also means that you accept the fees, terms, and conditions of the account.


Transfer
Account is closed and has been transferred to either an outside collection agency, sol to another company, or transferred to a revised account number


Universal Default
Your credit card interest rate can be raised to the highest possible rate if you are late on any other account. For example, if you have five credit cards and you are late on one, the interest rate for the other four cards may be increased by a large amount.

Unsecured Debt
An unsecured debt generally occurs when you use credit to purchase goods or services in exchange for your promise to pay the creditor back. The most common types of unsecured debt are credit cards and personal loans.


Variable Rate Loan


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