Amortization: A period in which a debt is reduced or paid off by regular payments.
Collateral: Something pledged as security for repayment of a loan, to be forfeited in the event of a default.
Collateral: Something pledged as security for repayment of a loan, to be forfeited in the event of a default.
Credit: The ability to borrow money with the understanding that you will repay later.
Credit Report: A statement that has information about your credit activity and current credit situation such as loan payment history and status of your credit accounts.
Default: Failure to repay a loan according to the terms agreed upon.
Equity: The difference between the fair market value of a property and the current indebtedness secured against the property.
Fair Market Value: The amount a property would sell for on the open market.
Grace Period: The period between the end of a billing cycle and the date your payment is due. During this time, you may not be charged interest as long as you pay your balance in full by the due date. Credit card companies are not required to give a grace period. However, most credit cards provide a grace period on purchases.
Interest: The amount paid to borrow money.
IRS 1098 Form: A form sent to taxpayers that reports the interest paid on a loan at a financial institution.
IRS 1099 Form: A form sent to taxpayers who receive income other than wages. For example, interest on savings accounts, retirement accounts, or social security benefits.
Mortgage: a loan used to finance property.
Personal loan: A loan where money is borrowed and paid back in fixed monthly payments in a relatively short amount of time, generally 6 months to 5 years.
Prequalification: An initial step in the mortgage process where a lender evaluates your financial information—such as income, assets, and debts—to give you an estimate of how much you might be able to borrow. It’s a quick and easy way to get an idea of your home-buying budget, but it’s not a guarantee of a loan.
Private Mortgage Insurance (PMI): A type of insurance that protects the lender in case you stop making payments on your mortgage. If your down payment is less than 20% of the home’s purchase price, some lenders might be required you to pay PMI.
Revolving Line of Credit: A preset borrowing limit that can be used at any time. Borrowers repay the debt. Once it is repaid, the money can be borrowed again without additional approval.
Second Mortgage: A loan that uses the equity in your home as collateral.
Secured Loan: A loan that is backed by collateral – financial assets you own like a home, car, or equipment. This collateral can be used as payment if you don’t pay back the loan.
Unsecured Loan: A loan that does not require collateral. Approval is based on a review of your credit history as well as other factors. The interest rate tends to be higher than secured loans.
W-2 Form: A form than an employer must send to an employee at the end of the year. The W-2 form reports and employee's annual wages and the amount of taxes withheld from his or her paycheck.