Financial Glossary
- Accrued Interest
- Interest earned but not yet paid
- Annual Percentage Rate (APR)
- The cost of credit expressed as a yearly rate. The annual percentage rate is often not the same as the interest rate. It is a percentage that results from an equation considering the amount financed, the finance charges, and the term of the loan.
- Credit Rating
- For individuals, credit risk is based on your financial resources and credit history. Your total debt level, timeliness in paying credit cards, and many other factors are taken into consideration. Credit bureaus use credit scoring to quantify to potential creditors how likely you are to pay back a loan.
- Credit Score
- A number that indicates an individual's creditworthiness. Credit bureaus determine the score with a statistical program. You are given points for such things as your credit card debt, number of cards, total debt level, and whether you rent or own your own home. Delinquencies, collection accounts, and charged-off accounts area also factored into this score. Even the number of inquiries from potential creditors can affect your score because a number of inquiries may signal credit problems. Creditors use the score to decide whether to give you a mortgage, issue a credit card, or offer a small business loan. A good score can result in a lower interest rate; a poor score can mean you will be charged a higher interest rate or denied a loan.
- Disclosure Statement
- A written explanation of the rates, fees, and terms of a specific loan based on the borrowers qualifications
- FICO
- The most common credit-scoring model used by lenders, it is also known as a Fair Isaac score. A FICO score can range from 200-900. According to this model, the higher your score, the less likely you are to default on a loan.
- Finance Charges
- Interest charged on loans made to you. For example, the interest rate on a credit card or the interest rate on a student loan is a finance charge.
- Interest
- Charge paid for borrowing money, calculated as a percentage of the remaining balance of the amount.
- Interest Rate
- The annual rate of interest on the loan, expressed as a percentage of 100. The rate used to calculate the monthly payment and finance charge of a loan
- Note
- Legal document obligating a borrower to repay a loan at a stated interest rate during a specified period of time.
- Prime Rate
- The interest rate that banks use in pricing loans to their most creditworthy customers
- Supplemental Fee
- The fee lenders charge a borrower to protect themselves against the risk of bad debt.
