The Personal Loan Alphabet

THE PERSONAL LOAN ALPHABET Put away the dictionary. Learn your financial ABCS right here! APR BORROWER CHARGE-OFF It stands for Annual Percentage Someone who receives money that he or she has agreed to A creditor's declaration that a borrower's debt will probably not be paid back Rate – the rate at which a borrower is charged over 12 pay back months NOTE: If you've ever taken out a personal loan, the borrower is you! NOTE: Sometimes this results in the debt being sold to a third-party collector DEFAULT EARLY PAY OFF FINANCE CHARGE Repaying borrowed money in full before it is due The cost of borrowing, including interest and any other fees Not paying owed money on time NOTE: Some companies charge a fee for this GUARANTOR HOLD INTEREST RATE Someone who promises to pay back a loan if the actual borrower does not repay May refer to a period where a financial institution temporarily stops processing an application until the applicant performs some action, such as providing information The percentage of the principal that you pay for borrowing money, usually over a period of a year L LOAN AGREEMENT A contract that defines the conditions for a loan, such as the borrowing time and/or the cost JUDGMENT KBA It stands for Knowledge-Based Authentication – a method of verifying someone's identity electronically by having the person answer questions about himself or herself Short for County Court Judgment (CCJ) – a legal decision regarding payment of money owed NOTE: These remain on your credit report for at least six years N MONTHLY PAYMENT NET WORTH OUTSTANDING BALANCE An amount of money that is due every month The total value of a person's money and possessions, minus their debts The total amount still unpaid on a loan PRINCIPAL BALANCE QUICK DECISION REPRESENTATIVE EXAMPLE Some lenders use this expression if they typically take less than 24 hours to approve or decline an application The total amount a lender has given to a borrower An illustration of the total cost of borrowing given the Representative APR, including the amount borrowed plus the interest and any other fees T SECURED LOAN TOP-UP UNSECURED LOAN A form of credit where a borrower offers possessions, such as a house, as collateral for the loan Extra money added to an existing loan A form of credit where a borrower does not offer any possessions as collateral for the loan NOTE: The borrower forfeits these possessions if he or she cannot repay the loan V VERIFICATION/ VALIDATION WITHDRAWN EXTENSION May refer to a loan application that is no longer under consideration The postponement of a loan's due date The process whereby a financial institution checks the accuracy of an applicant's information NOTE: Not all lenders can offer extensions V There you have it! Of course, this glossary is by no means comprehensive. You may stumble upon other unfamiliar terms and phrases in your search for credit, but don't get discouraged. The definition isn't too far out of reach. YTD It stands for year to date – the period from the start of the year to ZERO-PERCENT FINANCING And remember – don't dive into any credit agreement until you fully understand the terms! the current date A loan without interest References Cambridge University Press. (2013). Cambridge dictionaries online. Retrieved from http://dictionary.cambridge.org/ Wikipedia. (2013). Wikipedia: The free encyclopedia. Retrieved from http://en.wikipedia.org POUNDS to POCKET