# 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](https://www.dontbebroke.com/blog/installment-loans-for-bad-credit-a-path-to-financial-stability/), 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](https://www.dontbebroke.com/blog/4-ways-tackle-debt/) 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](https://www.dontbebroke.com/blog/understanding-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](https://www.dontbebroke.com/blog/installment-loans-for-bad-credit-a-path-to-financial-stability/) 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](https://www.dontbebroke.com/blog/safely-navigating-short-term-loans-with-bad-credit/) 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](https://www.dontbebroke.com/blog/emergency-loan-for-rent/) 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](https://www.dontbebroke.com/blog/should-you-take-a-loan-before-payday-5-questions-to-ask-yourself-first/) 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](https://www.dontbebroke.com/blog/common-myths-about-short-term-loans/) 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.