DLC Glossary

A

Account Balance

The remaining amount in a financial account, which could be the money you have or the amount owed on a loan with recurring payments.

APR (Annual Percentage Rate)

A percentage that represents the yearly cost of borrowing, including interest and additional fees like origination or application charges.

Assets

Tangible or intangible possessions with economic value that can be converted into cash, such as a house, vehicle, or investment accounts.

Auto Loan

A secured loan used to purchase a vehicle, where the lender holds a lien until the loan is fully repaid.

Automated Clearing House (ACH)

An electronic network facilitating nearly instant money transfers between U.S. financial institutions, governed by NACHA and the Federal Reserve.

Available Credit

The portion of your credit limit that is currently unused and available for spending.

B

Bad Credit

A term describing a low credit score, generally below 620, indicating a higher risk to lenders.

Bankruptcy

A legal process for individuals or businesses unable to repay outstanding debts, providing relief from certain financial obligations.

Billing Cycle

The interval between the closing dates of two consecutive billing statements, typically ranging from 20 to 45 days.

Bounced Check

A check that cannot be processed due to insufficient funds or other issues, often resulting in a penalty fee.

Budget

A financial plan that tracks income and expenses to manage spending and ensure financial stability.

Business Day

Standard working days, usually Monday through Friday, excluding weekends and national holidays.

C

Cash Advance

A short-term loan providing immediate cash, typically to be repaid by the next paycheck.

Cash Advance Fee

A charge incurred when withdrawing funds from a credit card, line of credit, or similar financial tools.

Cash Loans

Personal loans used to cover unexpected expenses, known for quick processing and immediate fund availability.

Charges

Fees paid to lenders for providing funds or credit, including interest, cash advance, and handling charges.

Co-Signer

An individual who agrees to repay a loan if the primary borrower defaults, enhancing the borrower’s creditworthiness.

Collateral

An asset pledged to secure a loan, which the lender can seize if the borrower defaults.

Compound Interest

Interest calculated on the initial principal and also on the accumulated interest from previous periods.

Credit

The ability to borrow money or access goods or services with the understanding that you’ll pay later.

Credit Bureau

An agency that collects and maintains individual credit information and sells it to lenders, creditors, and consumers in the form of a credit report.

Credit History

A record of a borrower’s responsible repayment of debts, used by lenders to assess creditworthiness.

Credit Limit

The maximum amount of credit that a financial institution extends to a client.

Credit Report

A detailed report of an individual’s credit history, including borrowing and repayment activities.

Credit Score

A numerical expression based on a level analysis of a person’s credit files, representing the creditworthiness of an individual.

Creditor

An entity to whom money is owed by the debtor.

Current Balance

The total amount owed on a credit card or loan account, including purchases, interest, and fees.

D

Debt

Money borrowed by one party from another under the condition that it is to be paid back at a later date, usually with interest.

Debt Consolidation

The process of combining multiple debts into a single loan or payment plan, often with a lower interest rate.

Debt-to-Income Ratio (DTI)

A personal finance measure comparing an individual’s monthly debt payment to their monthly gross income.

Default

Failure to repay a loan according to the agreed terms, which can lead to legal action or loss of collateral.

Delinquency

A situation where a borrower is late or overdue on a payment, such as a mortgage, bond, or other loan.

Direct Deposit

An electronic payment directly deposited into a recipient’s bank account, commonly used for paychecks.

Disbursement

The payment or distribution of money, such as loan funds being released to a borrower.

Down Payment

An initial payment made when something is bought on credit, reducing the amount of the loan.

Due Date

The date by which a payment must be made to avoid penalties or late fees.

E

Emergency Fund

A savings account set aside to cover unexpected expenses or financial emergencies.

Equity

The value of an owner’s interest in an asset, calculated by subtracting liabilities from assets.

Escrow

A financial arrangement where a third party holds and regulates payment of funds required for two parties involved in a transaction.

F

Finance Charge

The total cost of borrowing, including interest and fees.

Fixed Interest Rate

An interest rate that remains constant for the duration of the loan term.

Foreclosure

The legal process by which a lender takes control of a property due to the borrower’s failure to make payments.

G

Grace Period

A set period after the due date during which a payment can be made without penalty.

Gross Income

An individual’s total earnings before taxes and other deductions.

H

Hard Inquiry

A credit check that occurs when a financial institution examines your credit report as part of a lending decision.

Home Equity Loan

A loan where the borrower uses the equity of their home as collateral.

I

Installment Loan

A loan repaid over time with a set number of scheduled payments.

Interest Rate

The proportion of a loan charged as interest to the borrower, typically expressed as an annual percentage.

J

Joint Account

A bank or credit account shared by two or more individuals.

L

Late Fee

A charge imposed for not paying a bill or loan installment by its due date.

Lien

A legal right or interest that a lender has in the borrower’s property, granted until the debt obligation is satisfied.

Line of Credit

An arrangement between a financial institution and a customer that establishes a maximum loan balance that the lender permits the borrower to access or maintain.

Loan Term

The duration over which a loan is scheduled to be repaid.

M

Minimum Payment

The smallest amount a borrower can pay on a loan or credit card to remain in good standing.

Mortgage

A loan used to purchase real estate, where the property serves as collateral.

N

Net Income

An individual’s earnings after taxes and deductions.

Non-Sufficient Funds (NSF)

A situation where a bank account does not have enough money to cover a transaction.

O

Origination Fee

A charge by a lender for processing a new loan application.

Overdraft

Occurs when money is withdrawn from a bank account and the available balance goes below zero.

P

Payday Loan

A short-term, high-interest loan typically due on the borrower’s next payday. (dontbebroke.com)

Principal

The original sum of money borrowed in a loan, or the remaining balance excluding interest.

R

Refinancing

The process of replacing an existing loan with a new one, typically with better terms.

Revolving Credit

A type of credit that does not have a fixed number of payments, such as credit cards.

S

Secured Loan

A loan backed by collateral, reducing the lender’s risk.

Soft Inquiry

A credit check that does not affect your credit score, often used for pre-approvals.

T

Term Loan

A loan with a specified repayment schedule and a fixed or floating interest rate. (dontbebroke.com)

Title Loan

A short-term loan where the borrower uses their vehicle title as collateral.

U

Underwriting

The process by which lenders assess the risk of lending to a borrower.

Unsecured Loan

A loan that is not backed by collateral, posing a higher risk to lenders.

V

Variable Interest Rate

An interest rate that can change over time based on market conditions.

Verification of Employment (VOE)

A process used by lenders to confirm a borrower’s employment status and income.

W

Wage Garnishment

A legal procedure where a portion of an employee’s earnings is withheld for the payment of a debt.

Wire Transfer

An electronic transfer of funds across a network administered by banks or transfer service agencies.

Y

Yield

The earnings generated and realized on an investment over a particular period.