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Glossary for Payday Loan

ACH
automatic clearing house -a method of transferring funds to or from bank accounts

Annual Percentage Rate (APR)
The cost of credit, expressed as a yearly rate. APR is generally not the same as the contract interest rate.

Balance
The amount of money outstanding in an account.

Bankruptcy
A legal proceeding in U.S. Federal Court, entered into by borrowers who are unable to pay their debts that allows them to negotiate partial payment or the sale of the borrowers assets to partially pay back the debt. The information regarding a volentay or court ordered bankrupty stay on the borrower's credit history for up to 10 years.

Budget
A method or plan for the management of spending and saving of money.

Caps
An established limit to the amount interest rates can increase in an adjustable rate mortgage loan.

Cash
advance a source of emergency cash for people who are employed but may not have access to other credit sources. The advance is meant as bridge financing until the next payday. The advance is really a loan, interest is charged from the date of the advance.

Charge off
A loan or credit card debt written off as uncollectible from the borrower and often the borrower has sold or assigned the debt to a collection agency. The debt, however, remains valid and subject to collection.

Checking account
Money kept in a bank or savings and loan for safekeeping. Money can be easily withdrawn by writing checks or using an ATM or debit card.

Collateral or security
An asset pledged to ensure payment of debt.

Compound interest
Interest computed on the balance of a loan, in which the balance includes all unpaid interest.

Co-signer
A person who signs a loan agreement along with the borrower and assumes equal responsibility for repayment.

Credit
A promise to pay at a later date for goods or services purchased today.

Credit application
A written request for credit, generally in a form specified by the lender. Sometimes, an application fee is charged to cover the cost of loan processing.

Credit bureau
A company that compiles credit histories on prospective borrowers and provides credit reports to lenders. Lenders use these reports when making decisions on extending credit. The three major credit reporting agencies are Equifax, Experian and TransUnion.

Credit card
A card issued by a bank authorizing payment for purchases. Interest is charged on the outstanding balance.

Credit counseling
Professional counseling provided by organizations that help consumers find ways to repay their credit and get their financial affairs in order through the careful budgeting and management of money.

Credit limit
The maximum amount of money that may be charged on a credit card account or line of credit

Credit line (or personal line of credit)
The maximum loan amount a consumer can borrow against in an account. As a credit line is partially or fully repaid, the consumer can borrow against the account again.

Credit report
A record of someone's credit history, including outstanding debts, debt repayments, late payments and any bankruptcies that is compiled by a credit reporting agency.

Creditor
A person or business from whom you borrow, or to whom you owe, money.

Debit card
A card issued by a bank or other fianacial institution and used for making purchases. The purchase amount is deducted directly from your checking account or other accounts.

Debt
Money owed to another party.

Debt consolidation
A strategy sometimes used by consumers to better manage their debt problems. Rather than paying off several separate bills each month, a consumer consolidates his or her debts with a financial institution that will arrange for one lower monthly payment extending over a period of time.

Default
Failure to repay a loan or otherwise meet the terms of a loan agreement.

Delinquency
Failure to make payments on time.

Direct Deposit
An electronic transfer of funds to a bank account whereby there is no need for a paper check.

Equal Credit Opportunity Act
A federal law prohibiting lenders from discriminating against applicants for credit.

E-Signature or Electronic Signature
Electronic signature software binds your signature, or other mark, to a specific document. In June 2000, the U.S. government passed the E-sign bill, which gives electronic signatures the same legality as hand-written ones

Fair Credit Reporting Act
A federal law giving consumers the right to learn what information credit reporting agencies have on file about them and to dispute any inaccurate data in the file.

Fair Debt Collections Practices Act
A federal law to protect consumers from any harassing or abusive conduct, the use of false or misleading representations or unfair practices in the collection of debts.

Federal Deposit Insurance Corporation (FDIC)
A federal agency that insures consumer deposits in a bank or savings and loan for up to $100,000 per account. Deposits include checking and savings accounts and certificates of deposit.

Finance charge
The cost of credit expressed as a dollar amount.

Fixed interest rate
An interest rate that does not change over the term of the loan.

Foreclosure
A legal process in which property or other collateral which has been pledged as security for a loan may be sold to help repay the loan after a borrower has defaulted.

Installment loan
A loan in which the amount of payment and the number of payments are predetermined.

Interest
The amount a lender charges a customer for borrowing money.

Interest rate
The rate that lenders charge their borrowers for borrowing money. Usually expressed in terms of percentage per year.

Judgment
An order made by a court related to a lawsuit that decided who wins and who loses an issue brought before the courts on civil matters.

Late payment fee
A fee charged for a loan payment not received by the due date.

Lease
A contract that allows a consumer to use an asset, such as a car, in exchange for payment. At the end of the lease term, the asset must be returned.

Lender
A person or business which lends or offers loans to customers. Also referred to as a creditor.

Liable
Having legal responsibility.

Lien
A claim placed by a creditor on a piece of real estate, or property, to ensure the payment of a debt.

Loan
An amount borrowed to be repaid at a later date, with interest.

Loan agreement
A contract that spells out in detail the terms and conditions of a loan.

Mortgage loan
A loan used for the purchase of real estate. The property serves as security, or collateral, for the loan.

Public record
Information obtained from local, state or federal courts indicating a person's history of meeting financial obligations, including alimony and child support.

Refinance
Paying off an existing loan with the proceeds from a new loan usually done to get a lower interest rate.

Repossess
Forced or voluntary surrender of merchandise as a result of a consumer's failure to repay a loan as promised.

Right of rescission
A borrower's right to cancel a contract within three business days.

Savings account
Money kept in a bank or savings and loan association for safekeeping. Savings accounts earn interest on all money kept in the account.

Secured loan
A loan in which a borrower pledges an asset such as a home or car that may be sold if the borrower is unable to repay the loan.

Security
See collateral.

Simple interest
Interest computed on the principal balance outstanding as long as any portion remains unpaid.

Title
A legal document that provides evidence of property ownership.

Truth in Lending Act
A federal law that requires lenders to disclose to the borrower the true cost of a loan, including the actual interest rate and all terms and conditions of the loan, in a manner that is easily understood.

Unsecured loan
A loan granted based only on the borrower's promise to repay.

Variable interest rate
An interest rate that changes based on an index, such as the prime rate.

Yield
the effective rate of return paid on a savings or money market account or bond.