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Amortization

Amortization is an accounting term that refers to the process of allocating the cost of an intangible asset over a period of time. It also refers to the repayment of loan principal over time.

unsecured loan

An unsecured loan is a loan that is issued and supported only by the borrower's creditworthiness, rather than by a type of collateral. An unsecured loan is one that is obtained without the use of property as collateral for the loan. Borrowers generally must have high credit ratings to be approved for an unsecured loan.

variable rate offer

Any interest rate or dividend that changes on a periodic basis. Variable rates are often used for convertibles, mortgages, and certain other kinds of loans. The change is usually tied to movement of an outside indicator, such as the prime interest rate. Movement above or below certain levels is often prevented by a predetermined floor and ceiling for a given rate. also called adjustable rate.

average daily balance (calculation method)

Average daily balance method is a credit card accounting method where interest charges are based on the amount owed at the end of each day. Under the average daily balance method, each day's balance for the billing cycle is summed then divided by the number of days in the cycle, to compute the average daily balance. The average daily balance is then multiplied by the monthly interest rate to determine the customer's finance charge. The monthly interest rate is calculated by dividing the cardholder's APR by 12.

payday loans

a relatively small amount of money lent at a high rate of interest on the agreement that it will be repaid when the borrower receives their next paycheck:

two-cycle balance

Two-cycle billing is the balance computation method that allows credit card issuers to apply interest charges to two full cycles of card balances, rather than the most recent billing cycle's balances. Also called double-cycle billing or dual-cycle billing, the practice effectively eliminates the grace period for people who paid off a balance in the previous month. The Credit CARD Act of 2009 banned two-cycle billing effective Feb. 22, 2019

credit report

Your credit report contains your credit history as reported to the credit reporting agency by lenders who have extended credit to you. The information in your credit report is also used to generate credit scores such as your FICO® Scores.

previous balance method (calculation method)

A credit card accounting method where interest charges are based on the amount owed at the end of the beginning of the billing cycle. The previous balance method charges interest based on the amount of debt the consumer carries over from the previous billing cycle to the new billing cycle. The cardholder's APR is divided by 12 to determine the monthly interest rate, and the previous balance is multiplied by the monthly interest rate to get the finance charge for the current billing cycle. This method can be more expensive for consumers who are in the process of paying down debt, because payments don't immediately reduce the amount of interest owed.

20/10 Rule

A deposit requirement instituted by commercial banks for corporate lenders. The twenty percent rule stipulates that borrowers must keep deposits at the bank that are at least equal to 20% of their regular borrowings from their line of credit. However, the exact ratio of this rule is often contingent upon current interest rates and other factors.

adjusted balance method (calculation method)

A finance/accounting method where costs are based on the amount(s) owing at the end of the current time period (once credits and payments are posted). Read more: Adjusted Balance Method Definition | Investopedia http://www.investopedia.com/terms/a/adjustedbalancemethod.asp#ixzz47KbJw43B Follow us: Investopedia on Facebook

title loans

A loan where an asset is required as collateral. These loans are popular for two reasons. The first being that with this type of loan, the applicant's credit rating is not considered. The second being that title loans can be approved very quickly and for loan amounts as little as $100 in most cases.

secured loan

A loan where the borrower offers an asset to which the lender has access in the event of the borrower failing to make the loan repayments. A mortgage backed by the property is a common example.

single-payment credit

A loan whose principal is due in total with a single payment at maturity.

capacity

Capacity: This refers to your ability to repay the debt. The lender will look to see if you have been working regularly in an occupation that is likely to provide enough income to support your credit use.

capital

Capital: A lender will want to know if you have valuable assets such as real estate, personal property, investments, or savings with which to repay debt if income is unavailable.

collateral

Collateral refers to any asset of a borrower (for example, a home) that a lender has a right to take ownership of and use to pay the debt if the borrower is unable to make the loan payments as agreed.Some lenders may require a guarantee in addition to collateral. A guarantee means that another person signs a document promising to repay the loan if you can't.

closed-end loan

Common type of consumer installment loan where (in contrast to an open-end loan) the borrower cannot change the (1) number and amount of installments, (2) maturity date, and/or (3) credit terms. Also called closed-end credit.

installment loan

Consumer or business loan (such as for a vehicle, vacation, or equipment) in which the principal and interest are repaid in equal installments at fixed intervals (usually every month). These loans are commonly secured by the item purchased or by the personal property (excluding real estate) of the borrower. Also called installment credit.

FICO score

FICO scores are the credit scores most lenders use to determine your credit risk. You have three FICO scores, one for each of the three credit bureaus - Experian, TransUnion, and Equifax. Each score is based on information the credit bureau keeps on file about you.

conditions

Lenders consider a number of outside circumstances that may affect the borrower's financial situation and ability to repay, for example what's happening in the local economy. If the borrower is a business, the lender may evaluate the financial health of the borrower's industry, their local market, and competition.Some lenders develop their own loan decision "scorecards" using aspects of the 5 C's and other factors. Example: borrower's credit used vs. credit available.Click the Next button to learn about your credit score. BackNext

revolving credit

Revolving credit is a type of credit that does not have a fixed number of payments, in contrast to installment credit. Credit cards are an example of revolving credit used by consumers. Corporate revolving credit facilities are typically used to provide liquidity for a company's day-to-day operations. They were first introduced by the Strawbridge and Clothier Department Store.

credit rating

an estimate of the ability of a person or organization to fulfill their financial commitments, based on previous dealings. the process of assessing this.

Truth in Lending Act

of 1968 is United States federal law designed to promote the informed use of consumer credit, by requiring disclosures about its terms and cost to standardize the manner in which costs associated with borrowing are calculated and disclosed.

credit

the ability of a customer to obtain goods or services before payment, based on the trust that payment will be made in the future:

grace period

the extra time allowed before having to pay a debt or complete a transaction

character

your credit history, a lender may decide whether you possess the honesty and reliability to repay a debt. Considerations may include: