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Terms in this set (63)
3 C's of Credit
Character, Capital and Capacity
Character: From your credit history, a lender may decide whether you possess the honesty and reliability to repay a debt.
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.
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.
Annual Percentage Rate
The annual rate charged for borrowing or earned through an investment, and is expressed as a percentage that represents the actual yearly cost of funds over the term of a loan.
Auto Finance Companies
An institution engaged in such specialized forms of financing as purchasing accounts receivable, extending credit to retailers and manufacturers, discounting installment contracts, and granting loans with goods as security.
The total amount of money owed to a third party such as a credit card company, utility company, mortgage banker or other type of lender or creditor.
A financial institution licensed to receive deposits and make loans. They may also provide financial services, such as wealth management, currency exchange and safe deposit boxes.
A legal proceeding involving a person or business that is unable to repay outstanding debts.
Bankruptcy Chapter 7
A proceeding in which a company stops all operations and goes completely out of business. A trustee is appointed to liquidate (sell) the company's assets, the proceeds are used to pay off the debts, and then the remaining debt is discharged. Individuals may declare bankruptcy as well.
Bankruptcy Chapter 11
A form of bankruptcy that involves a reorganization of a debtor's business affairs, debts and assets. A type of bankruptcy that is generally filed by corporations that require time to restructure their debts, and it gives the debtor a fresh start, subject to the debtor's fulfillment of his obligations under the plan of reorganization.
Bankruptcy Chapter 13
A U.S. bankruptcy proceeding in which the debtor undertakes a reorganization of his or her finances under the supervision and approval of the courts. As part of the reorganization, the debtor must submit and follow through with a plan to repay outstanding creditors within three to five years. In most circumstances, the repayment plan must provide a substantial payback to creditors - at least equal to what they would receive under other forms of bankruptcy - and it must, if needed, use 100% of the debtor's income for repayment.
A short-term loan from a bank or alternative lender. The term also refers to a service provided by many credit card issuers allowing cardholders to withdraw a certain amount of cash, either through an ATM or directly from a bank or other financial agency.
A card that charges no interest but requires the user to pay his/her balance in full upon receipt of the statement, usually on a monthly basis.
Property or other assets that a borrower offers a lender to secure a loan.
A lender issues you a single personal loan that you use to pay off your other debts, such as medical bills or balances on high-interest credit cards.
Consumer Credit Counseling Services
Counseling services to help a creditor avoid bankruptcy, as well as provide basic education on financial management.
Debts that are owed as a result of purchasing goods that are consumable and/or do not appreciate.
The act of signing for another person's debt which involves a legal obligation made by the cosigner to make payment on the other person's debt should that person default.
Credit Card Companies
A financial company that issues credit cards that allows the card holder to borrow funds, charge interest, and are primarily used for short-term financing.
A card issued by a financial company giving the holder an option to borrow funds, usually at point of sale. These cards charge interest and are primarily used for short-term financing.
A record of a consumer's ability to repay debts and demonstrated responsibility in repaying debts.
An assessment of the creditworthiness of a borrower in general terms or with respect to a particular debt or financial obligation.
A detailed report of an individual's credit history.
Credit Reporting Agency
This term refers to businesses that maintain historical information pertaining to credit experience on individuals or businesses.
A statistical number that depicts a person's creditworthiness. Lenders use this to evaluate the probability that a person repays his debts.
A twelve-step program for people who want to stop incurring unsecured debt.
A debtor is unable to meet the legal obligation of debt repayment, and it also refers to cases in which one party fails to perform on a futures contract as required by an exchange
Date on which a bill of exchange (check, draft, letter of credit, etc.) is payable.
A fee charged for the use of credit or the extension of existing credit.
Fixed Interest Rate
An interest rate on a liability, such as a loan or mortgage, that remains the same either for the entire term of the loan or for part of the term.
A situation in which a homeowner is unable to make full principal and interest payments on his/her mortgage , which allows the lender to seize the property, evict the homeowner and sell the home, as stipulated in the mortgage contract.
A legal process whereby payments towards a debt owed by an individual can be paid by a third party - which holds money or property that is due to the individual - directly to the creditor.
The provision in most loan and insurance contracts that allows payment to be received for a certain period of time after the actual due date.
Home Equity Loans
Also known as a second mortgage, lets homeowners borrow money by leveraging the equity in their homes.
The crime of obtaining the personal or financial information of another person for the sole purpose of assuming that person's name or identity to make transactions or purchases.
A loan that is repaid by the borrower in regular installments and is generally repaid in equal monthly payments that include interest and a portion of principal.
The charge for the privilege of borrowing money, typically expressed as annual percentage rate.
A charge a consumer pays for making a required minimum payment on a credit card after the due date.
A legal right granted by the owner of property, by a law or otherwise acquired by a creditor.
The maximum amount of credit a financial institution extends to a client through a line of credit as well as the maximum amount a credit card company allows a borrower to spend on a single card.
Line of Credit
An arrangement between a financial institution, usually a bank, and a customer that establishes a maximum loan balance that the lender permits the borrower to access or maintain.
An event that usually occurs when a company is insolvent, meaning it cannot pay its obligations as and when they come due.
Low Credit Rating
Signals bad credit.
The smallest amount of a credit card bill that a credit card holder must pay each billing cycle.
A debt instrument, secured by the collateral of specified real estate property, that the borrower is obliged to pay back with a predetermined set of payments.
Gathers paperwork from a borrower and passes that paperwork along to a mortgage lender for underwriting and approval.
To spend more than the planned or allotted amount of money.
Having the control over a business enterprise and being able to dictate its functioning and operations.
A business that provides personal loans, resells retail items and offers auxiliary services, such as money transfers or cellphone activation.
A ticket issued by a pawnbroker in exchange for an article pawned, bearing particulars of the loan.
A type of short-term borrowing where an individual borrows a small amount at a very high rate of interest.
Also called the default rate, is the very high interest rate charged by the credit card issuer when a borrower violates the card's terms and conditions.
A numerical code used in many electronic financial transactions.
Unscrupulous actions carried out by a lender to entice, induce and/or assist a borrower in taking a mortgage that carries high fees, a high interest rate, strips the borrower of equity, or places the borrower in a lower credit rated loan to the benefit of the lender.
The act of paying back money previously borrowed from a lender.
A term used to denote a financial institution taking back an object that was either used as collateral or rented or leased.
A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed.
Secured Credit Card
A type of credit card that is backed by a savings account used as collateral on the credit available with the card.
A loan in which the borrower pledges some asset (e.g. a car or property) as collateral for the loan, which then becomes a secured debt owed to the creditor who gives the loan.
Loan that is issued and supported only by the borrower's creditworthiness, rather than by any type of collateral.
Someone who prepares tax returns, often income tax returns, often for a person other than the taxpayer, and generally for compensation.
Title for Goods
A provision in a contract for the sale of goods that the title to the goods remains vested in the seller until certain obligations (usually payment of the purchase price) are fulfilled by the buyer.
Truth in Lending Act of 1968
A federal law enacted in 1968 to consumers in their dealings with lenders and creditors. The most important aspects of the act concern the pieces of information that must be disclosed to a borrower prior to extending credit: annual percentage rate (APR), term of the loan and total costs to the borrower.
The act of lending money at an interest rate that is considered unreasonably high or that is higher than the rate permitted by law.
An interest rate on a loan or security that fluctuates over time, because it is based on an underlying benchmark interest rate or index that changes periodically.
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