Term
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Definition
| A loan involving a formal contract detailing exactly how much you are borrowing and when and how you are going to pay it back. |
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Term
| Single Payment (balloon loan) |
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Definition
| A loan payment that is paid back in a single lump sum payment at maturity. At that date, you pay back the amount borrowed plus any interest. |
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Term
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Definition
| A short term loan that provides funding until a longer-term source can be secured or until additional financing can be found. |
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Term
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Definition
| a loan that calls for repayment of both the interest and the principal at regular intervals, with the payment level set in such a way, that the loan expires at a certain date. |
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Term
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Definition
| The repayment of a loan using equal monthly payments that cover a portion of the principal and the interest. The interest amount decreases as time goes on, and the payment toward the principal increases. |
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Term
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Definition
| a loan that is guaranteed by a specific asset. Often the asset the loan was taken out for. |
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Term
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Definition
| A loan that is not guaranteed by a specific asset. They are quiet expensive. |
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Term
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Definition
| A loan with an interest rate that stays fixed for the entire duration of the loan. |
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Term
| Variable (adjustable) interest rate loan. |
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Definition
| a loan where the interest rate does not stay fixed, but varies based on market interest rates. If interest rates drop, you win, otherwise you lose. |
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Term
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Definition
| The interest rate banks charge to their most creditworthy customers. Often variable loans rates are set a certain percentage above the prime rate. |
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Term
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Definition
| A variable-rate loan that can be converted into a fixed-rate loan at the borrowers option at specified dates. |
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Term
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Definition
| An agreement that identifies whether the lender or borrower retains control over the item being purchased. |
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Term
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Definition
| The failure of a borrower to make a scheduled interest or principal payment. |
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Term
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Definition
| The formal documentation that outlines the legal obligations of both the lender and the borrower. |
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Term
| Insurance Agreement Clause |
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Definition
| A loan requirement on a borrower to purchase life insurance that would pay off the loan in the event that the borrower dies. |
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Term
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Definition
| A loan requirement stating that if the borrower misses a payment, the entire loan becomes due immediately. |
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Term
| Deficiency Payments Clause |
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Definition
| A loan requirement stating that if you default on a secured loan, not only can the lender repossess whatever is secured, but if the sale of the asset does not cover what you owed, you can be billed for the difference. |
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Term
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Definition
| A clause in a loan contract defining what actions a lender can take to claim money from a borrower in the case of a default. |
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Term
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Definition
| A loan that uses a borrower's built up equity in his/her home as collateral against the loan. It does not have to be used solely for the purpose of buying a home. And the amount you can borrow is typically 50 - 75% of your equity - your first mortgage balance. |
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Term
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Definition
| A loan with subsidized interest rates given to students based on financial needs. |
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Term
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Definition
| A loan made specifically for the purchase of an automobile, which uses the automobile as collateral. |
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Term
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Definition
| they are generally given by cheque-cashing companies, are aimed at people with jobs and chequing accounts who need some extra money. They typically last 2 weeks, and do not have interest, instead they are discounted. |
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Term
| Loan Disclosure Statement |
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Definition
| A statement that provides the APR and interest charges associated with a loan. |
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Term
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Definition
| Interest = Principle x Interest rate x Time. |
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Term
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Definition
| Average Annual Finance Charges / Average Loan Balance Outstanding |
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Term
| Add-on Method for Installment Loans |
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Definition
| Interest charges are calculated using the original balance, these charges are then added to the loan, and this amount is paid off equally over the life of the loan. They should be avoided as they are costly. |
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Term
| Rule of 78s or sum of the Year's Digits |
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Definition
| A rule to determine what proportion of each add-on loan payment goes towards interest and what proportion goes towards paying the principal. |
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Term
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Definition
| 1) Sum up all the months digits [(N/2)*(N+1)] Where N is the number of months the loan will be outstanding. 2) Sum the remaining months digits. 3) Divide step 2 by step 1. 4) Multiply step 3 by the total finance charges. |
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Term
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Definition
| total monthly non mortgage debt payments / total monthly take home pay. |
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Term
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Definition
| Says that you should repay all your consumer debt every 4 years. |
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Term
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Definition
| a trained professional specialized in developing personal budgets and debt repayment programs. |
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Term
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Definition
| A loan used to pay off all your current debts. |
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Term
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Definition
| the inability to pay off all your debts. Student loans, alimony, & tax liabilities remain. |
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