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The A to Z of Credit and Lending

Interested in obtaining credit or loan? Or perhaps you already have one but find it difficult to fully understand the letters you are sent. When analysing a loan or comparing loans from lenders, you may be at a disadvantage if you are unfamiliar with key lending terms.




The typical loan terms and acronyms listed here will help you broaden your knowledge, so you can make credit decisions more intelligently. Before you sign a loan, be sure you are aware of all the Ts & Cs.


A - Annual Percentage Rate (APR): a percentage rate that reflects the amount of interest earned or charged.


B - Borrower: when you apply for a loan and receive funds, you are the borrower. As the borrower, you’ll have to repay the loan according to the loan terms agreed upon.


C - Credit score: a numerical expression designed to represent your credit risk, or the likelihood you will pay your bills on time based on information from your credit reports.

D - Default: when there is a failure to make payments for a debt or to fulfill a duty or promise as specified in the Promissory Note and/or Deed of Trust.


E - Equity: The difference between the fair market value of a property and the current indebtedness secured on the property.

F - Fixed interest rate: in which the interest rate remains the same for the duration of the loan. Since the interest rate remains the same, the monthly payment doesn’t change. The predictable monthly payments make it easier for to budget loan payments.

G - Grace Period: During this period no late fees will be charged.

H - Hard credit check: This credit inquiry is performed by the lender and usually has a small impact on your credit score—your score may drop by up to four points. A hard credit check remains on your credit report for two years.


I - Interest: An annual rate charged the borrower for the use of credit.

J - Joint Liability: Liability shared among two or more people, each of whom is liable for the full amount of the debt.


K - Known liabilities: These are debts that a company has little uncertainty about as they know who to pay, how much to pay them, and when the payment is due.

L - Late Charge or Late Fee: Penalty paid by the consumer when a payment is made after the scheduled due date, or after the grace period.


M - Mortgage: A written document detailing the use of a property as security for a debt.

N - Note: A document that evidence a debt and a promise to repay.

O - Origination Fee: A fee charged by a lender for the origination of a mortgage loan. It is expressed as a percentage of the loan amount.

P - Principal: The amount of money you agreed to borrow is considered the principal, excluding the interest and penalties. As you repay your loan, the principal balance decreases.

Q - Quasi-contract: A quasi contract is a legal obligation imposed by law to prevent unjust enrichment.

R - Recourse loan: it is secured by collateral. If you default on your loan, the lender can seize the asset attached to the loan. If such assets mentioned aren't enough to satisfy the debt, they may be able to go after other personal assets.

S - Short-term loan: It is a type of loan that is obtained to support a temporary personal or business capital need, usually paid within a year from getting the loan.

T - Term: Refers to the maturity or length of time until final repayment on a loan, bond, sale or other contractual obligation.

U - Unsecured loan: Loan that doesn’t have collateral attached to it and the lender cannot seize your personal assets, unless they are awarded a judgment by a court. Some examples are credit cards, personal loans and student loans.


V - Variable rate: a type of interest rate that can change over the course of the repayment term.

W - Write off: When an investment, such as a loan, becomes seriously delinquent or in default and is determined to be uncollectible, the lender may choose to charge the outstanding investment amount as an expense or a loss.


Z was impossible, but if you think of a term, let us know - you will get major brownie points!


Fempire Finance


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