Loan Glossary
A loan used specifically to purchase a vehicle. The vehicle itself often acts as collateral for the loan.
A type of unsecured loan that can be used for any personal need, such as debt consolidation, medical expenses, or travel
A loan provided by a financial institution to purchase or maintain a home. The property is used as collateral until the loan is fully repaid.
The act of paying off part or all of a loan before the scheduled payment dates. Prepayment may reduce interest costs but can also incur fees.
A loan to help students pay for post-secondary education and related fees, such as tuition, books, and living expenses.
A loan where gold jewelry or coins are pledged as collateral. It is typically used for short-term credit needs.
A short-term loan typically due on the borrower’s next payday. These loans often have high-interest rates and fees.
A loan used to combine multiple debts into one with a lower interest rate, making it easier to manage monthly payments.
The fixed payment amount a borrower pays to a lender at a specific date each month. It includes both principal and interest.
The original sum of money borrowed in a loan, or the amount of the loan remaining (excluding interest).
The percentage charged on the loan by the lender for borrowing money. It is usually expressed as an annual percentage.
The process of gradually paying off a loan by regular installments of principal and interest over a specified period.
The time period for which a loan is granted. It determines how long you have to repay the loan.
An interest rate that remains constant over the entire term of the loan.
An interest rate that fluctuates over time with market conditions.
The yearly interest rate, inclusive of fees and other loan costs, which provides a complete picture of the cost of borrowing.
A fee charged if a borrower pays off a loan before the agreed-upon loan term.
A large, one-time payment due at the end of a loan term, typically in loans that have lower payments over time.
An asset pledged by the borrower to the lender as security for a loan. If the borrower defaults, the lender can seize the collateral.
A numerical expression of a person’s creditworthiness, based on their credit history. It affects the likelihood of loan approval and interest rates.
A measure used by lenders to assess a borrower’s ability to repay a loan, calculated by dividing total monthly debt payments by gross monthly income.
Failure to repay a loan according to the terms agreed upon in the loan agreement. This can result in legal action and damage to the borrower’s credit score.
The legal process where a lender takes control of a property used as collateral after the borrower defaults on loan payments.
A person who agrees to repay the loan if the borrower is unable to do so. This provides an added layer of security for the lender.
A legal claim against a borrower’s property by a lender until the loan is paid off. In the case of non-payment, the lender can seize the property.
A legally binding contract between a borrower and a lender that outlines the terms, conditions, and responsibilities associated with the loan.
The process of taking out a new loan to replace an existing loan, often to take advantage of lower interest rates or better terms.
A loan offered to borrowers with poor credit history, typically at a higher interest rate due to increased risk.
A period during which no penalty or late fee is charged if payment is delayed. Some loans offer a grace period after the due date for repayments.
A ratio used by lenders to assess the risk of lending, calculated by dividing the loan amount by the appraised value of the collateral (e.g., property in a mortgage).
A loan that is repaid over time with a set number of scheduled payments (installments). Most mortgages and car loans are installment loans.
Modifying the terms of a loan due to the borrower’s inability to meet the original terms. This may involve extending the loan tenure, reducing interest rates, or offering forbearance.
A temporary postponement of loan payments allowed by the lender in times of financial hardship.
It occurs when a borrower fails to make the required loan payment by the specified due date outlined in the loan agreement. Payments are considered late if they are not received by the lender on or before the scheduled due date.
The date by which the payment must be made, as per the loan agreement.
Many lenders offer a grace period after the due date (typically 10 to 15 days), during which a late payment may not incur penalties. However, after this period, late fees are usually applied.
Borrowers are often subject to penalties, known as late payment charges or late fees, when they miss the due date. These can be a fixed fee or a percentage of the overdue amount.
If the payment is delayed for more than 30 days, it may be reported to credit bureaus, negatively affecting the borrower's credit score.
In addition to late fees, interest may continue to accrue on the outstanding loan balance, increasing the total amount due.
Repeated late payments can lead to default, legal actions, or repossession of collateral (for secured loans like mortgages and car loans).
A loan used specifically to purchase a vehicle. The vehicle itself often acts as collateral for the loan.
A type of unsecured loan that can be used for any personal need, such as debt consolidation, medical expenses, or travel
A loan provided by a financial institution to purchase or maintain a home. The property is used as collateral until the loan is fully repaid.
The act of paying off part or all of a loan before the scheduled payment dates. Prepayment may reduce interest costs but can also incur fees.
A loan to help students pay for post-secondary education and related fees, such as tuition, books, and living expenses.
A loan where gold jewelry or coins are pledged as collateral. It is typically used for short-term credit needs.
A short-term loan typically due on the borrower’s next payday. These loans often have high-interest rates and fees.
A loan used to combine multiple debts into one with a lower interest rate, making it easier to manage monthly payments.
The fixed payment amount a borrower pays to a lender at a specific date each month. It includes both principal and interest.
The original sum of money borrowed in a loan, or the amount of the loan remaining (excluding interest).
The percentage charged on the loan by the lender for borrowing money. It is usually expressed as an annual percentage.
The process of gradually paying off a loan by regular installments of principal and interest over a specified period.
The time period for which a loan is granted. It determines how long you have to repay the loan.
An interest rate that remains constant over the entire term of the loan.
An interest rate that fluctuates over time with market conditions.
The yearly interest rate, inclusive of fees and other loan costs, which provides a complete picture of the cost of borrowing.
A fee charged if a borrower pays off a loan before the agreed-upon loan term.
A large, one-time payment due at the end of a loan term, typically in loans that have lower payments over time.
An asset pledged by the borrower to the lender as security for a loan. If the borrower defaults, the lender can seize the collateral.
A numerical expression of a person’s creditworthiness, based on their credit history. It affects the likelihood of loan approval and interest rates.
A measure used by lenders to assess a borrower’s ability to repay a loan, calculated by dividing total monthly debt payments by gross monthly income.
Failure to repay a loan according to the terms agreed upon in the loan agreement. This can result in legal action and damage to the borrower’s credit score.
The legal process where a lender takes control of a property used as collateral after the borrower defaults on loan payments.
A person who agrees to repay the loan if the borrower is unable to do so. This provides an added layer of security for the lender.
A legal claim against a borrower’s property by a lender until the loan is paid off. In the case of non-payment, the lender can seize the property.
A legally binding contract between a borrower and a lender that outlines the terms, conditions, and responsibilities associated with the loan.
The process of taking out a new loan to replace an existing loan, often to take advantage of lower interest rates or better terms.
A loan offered to borrowers with poor credit history, typically at a higher interest rate due to increased risk.
A period during which no penalty or late fee is charged if payment is delayed. Some loans offer a grace period after the due date for repayments.
A ratio used by lenders to assess the risk of lending, calculated by dividing the loan amount by the appraised value of the collateral (e.g., property in a mortgage).
A loan that is repaid over time with a set number of scheduled payments (installments). Most mortgages and car loans are installment loans.
Modifying the terms of a loan due to the borrower’s inability to meet the original terms. This may involve extending the loan tenure, reducing interest rates, or offering forbearance.
A temporary postponement of loan payments allowed by the lender in times of financial hardship.
It occurs when a borrower fails to make the required loan payment by the specified due date outlined in the loan agreement. Payments are considered late if they are not received by the lender on or before the scheduled due date.
The date by which the payment must be made, as per the loan agreement.
Many lenders offer a grace period after the due date (typically 10 to 15 days), during which a late payment may not incur penalties. However, after this period, late fees are usually applied.
Borrowers are often subject to penalties, known as late payment charges or late fees, when they miss the due date. These can be a fixed fee or a percentage of the overdue amount.
If the payment is delayed for more than 30 days, it may be reported to credit bureaus, negatively affecting the borrower's credit score.
In addition to late fees, interest may continue to accrue on the outstanding loan balance, increasing the total amount due.
Repeated late payments can lead to default, legal actions, or repossession of collateral (for secured loans like mortgages and car loans).
