Annual Percentage Rate (APR)

The total finance charge (including interest, points, and other finance charges) expressed as a percentage of the amount financed.

Automatic Payment

This means a set payment amount is automatically taken out of your account every month on the day specified.

Collateral (or security)

Personal property pledged as a guarantee that you will repay your loan. Property such as houses, cars, savings accounts, bonds, or certificates of deposit are commonly used as collateral.

Credit Agencies/Credit Bureaus

Organizations that collect individual consumer credit information and provide credit reports to potential lenders, employers, landlords, etc., for purposes of aiding in their decision-making process.

Equity

The difference between the current value and the outstanding loans on a property.

Finance Charges

The total cost of interest and other charges, direct or indirect, the borrower must pay to obtain credit.

Fixed Interest Rate

An interest rate the borrower locks into at the origination of the loan and does not change during the term of the loan.

Index

The indicator of current economic conditions used to determine changes in adjustable loan interest rate.

Interest

A charge for money borrowed generally stated as a percentage of the amount borrowed.

Line of Credit

An extension of credit subject to a variable interest rate that may be borrowed against when needed and paid back in the same manner and under the same terms as a loan.

Note

A written promise to pay a stipulated sum of money to a party under mutually agreed upon conditions. Also called a promissory note.

Point

An amount equal to one percent of the loan amount.

Pre-payment Penalty

A penalty fee charged to a borrower who pays off a loan before the term of the loan is complete.

Prime Rate

The most favourable interest rate charged by lenders on a short-term loan to qualified customers. Rates (APRs) are established as the prime rate plus an additional amount.

Principal

The loan amount not including interest.

Secured Personal Loan

A fixed interest rate personal loan that requires collateral or security of a savings account, stocks, bonds, certificates of deposit, etc.

Term

The time limit within which a loan must be repaid.

Title

Rights of ownership of property.

Underwriting

The process of determining risk inherent in a particular loan and establishing suitable loan terms and conditions.

Unsecured Personal Loans

A fixed interest rate personal loan that requires no collateral or security.

Variable Interest Rate

An interest rate which is tied to an index and fluctuates during the life of the line of credit.