Glossary

The ACH network processes electronic financial transactions. This includes Direct Deposit and Direct Payments for consumers and businesses. Federal, state and local governments use ACH as well. When your employer deposits funds in your account electronically on pay day, that is ACH at work. When you pay a bill online or set up autopay for your monthly bills, you’re using ACH. From salaries to mortgage payments to Social Security, tens of millions of Americans use ACH every day.

APR is a standardized measurement of the cost of credit, used in reference to everything from car loans to credit cards. APR is an annualized representation of your interest rate. Since the Truth in Lending Act (TILA)  requires that all financial institutions calculate APR the same way, looking at the APR can help you compare loan and credit card offers to secure the best rate. Choosing the vendor with the lowest APR can help you spend less on your debt. With credit cards, your APR comes into play when your debt carries over into the next billing cycle. If you carry a balance on a credit card, you will pay the interest on your balance. Learn more about APR here.

A budget is a breakdown of your expenses and income for a set time. Creating a budget can give you a detailed picture of your finances, showing you how much you are spending on necessities and where you may be able to eliminate other expenses. It can highlight areas where you are wasting money and ways to save more. The 50/30/20 budget rule is a popular way to break up your expenses and spend responsibly. The rule states that you should spend up to 50% of your after-tax income on needs and obligations, 30% towards other expenses and 20% on savings and debt repayment. Budgeting can help you create an emergency fund and cover unexpected expenses. You can also pay down debt faster if you include debt repayment in your budget.

A cash advance is a small, short-term loan available through banks, credit cards, lending apps and other sources. Cash advances can provide money in a hurry but often have high interest rates and fees. You can learn more about cash advances here.

A charge off occurs when a financial institution has decided that a borrower will never repay a loan and deems the loan uncollectable. This results in a negative mark on the borrower’s credit report. A charge off is considered a serious negative event and can adversely impact your credit score and ability to borrow funds in the future. After charging off a loan, the original lender may engage a third party debt collector to attempt to recover what is owed. If you see a charge off reported on your credit report, you could reach out to the lender or creditor to see if you can repay your debt and have the mark removed, but it may be too late. A charge off can stay on your report for seven years. A charge off also does not mean that your debt is wiped clean; you are still legally responsible for the amount owed.

A checking account is a deposit account held at a financial institution that allows the owner of the account to make withdrawals and deposits. A checking account is required to get approved for many types of loans including personal loans. A lender needs to be able to deposit funds electronically to a bank account and sometimes they can only make electronic deposits to checking, not savings, accounts. You can learn more about checking accounts here.

Collateral, or security, is an asset that a lender accepts in order to lower their risk in making a loan. The collateral is said to “secure” the loan – for example, a car loan is secured by the automobile, and a mortgage loan is secured by the home. Securing the loan with collateral allows the lender some recourse if the borrower defaults, since in that situation the lender can seize the collateral and sell it. If you obtain a secured or collateralized loan, you risk the loss of that asset if you cannot repay your debt. That is why it is vital that you only borrow what you can afford to repay.

Compound interest is interest on a loan or deposit that accrues on both the initial principal and the accumulated interest from previous periods.

A co-signer is a person who signs an agreement to pay back a loan if you do not. Some people ask their parents, close family members or friends to co-sign on loans that they can’t qualify for on their own. Adding a co-signer to a loan is beneficial to both the lender and the borrower, but can negatively impact the co-signer. A co-signer is obligated to pay back a loan the same as the borrower, so if you can’t make your payments, your co-signer is on the hook. If they do not have the funds to make payments, both of you can face defaulting and the consequences that come with it. Learn more about the pros and cons of adding a co-signer here.

Credit is the ability to borrow money and make purchases with an understanding that you will repay the debt later.

Learn more about credit in Uprova’s blog posts.

A credit bureau, or credit reporting agency, is an organization that collects and researches information about individuals and sells it to creditors, so that they can use the information in making decisions like whether to move forward with an application or extend credit. Lenders use credit bureau information to evaluate prospective borrowers and their ability to repay a loan. Learn more about credit bureaus here.

A credit card is a physical card that is provided to a consumer by a bank or credit union (called an “issuer”) to make purchases, with the agreement that the cardholder will pay back the card issuer for the cost of any items purchased, plus any predetermined fees and interest if applicable. Issuers often work with other companies, such as airlines or e-commerce companies, to provide other benefits to the consumer who uses the card. Only using the credit card for what you can afford that month, and paying the entire statement balance on time, is a sensible way of using credit.

Learn more about credit cards here or browse Uprova’s blogs on credit cards.

Lines of credit – including credit cards – are all subject to a credit limit, which is the limit on the amount of credit able to be used to make purchases. Once a borrower hits their credit limit, they are unable to draw on any more funds to make purchases and their credit card will be declined if additional purchases are attempted. Usually once the borrower pays down the debt they will be able to make purchases again. Learn more about credit limits here.

You can also view different types of debt relief through our blog posts.

A credit report is a statement that has information about your credit activities. Your credit history includes your loan payment history and status of your credit accounts. A credit report is used by lenders to determine your credit worthiness, including how much they can approve you for, the interest rate, and fees that may apply. Learn more here.

Articles on Credit Reports and Credit Reporting Agencies can be found on the Uprova blog.

A creditor is the entity, person or institution, that extends credit by giving a person or company permission to borrow money that will be repaid in the future.

A debit card is issued by a financial institution and is linked to the user’s checking account. Unlike a credit card, which in effect borrows money to be paid back in the future, using a debit card immediately withdraws the funds from the user’s checking account. Learn more about Debit Cards here.

Debt is a sum of money that is owed to another (usually a financial institution). People often take on debt to cover large purchases they couldn’t afford without credit or funding.

Debt consolidation is a type of loan or service that combines the debt owed to multiple parties. When a person has multiple debts with high balances, debt consolidation can be a useful tool by allowing the borrower with only one loan payment to manage. Debt consolidation can combine multiple debt types including credit card debt and personal loan debt. It may be the case that the interest rate for the debt consolidation loan is lower than the other debts, allowing the borrower to pay their debt faster.

A default is a failure to live up to one’s duties under a contract. In the case of a loan, this means a failure to pay back the loan as agreed. When a borrower defaults, the lender may send the debt to a debt collection agency whose job it is to reach the borrower and collect on the unpaid funds. Defaulting on a loan can cause a borrower’s credit score to drop drastically. If you can’t make your payment on time, you should immediately contact your lender directly to discuss restructuring your loan terms or other repayment options. Learn more about defaulting here.

If a borrower is considered delinquent on a loan, it means that they are behind on their payments. Most lenders will declare a loan to be in default if the period of delinquency goes on too long, but may also allow the borrower to get their loan back into a good status before declaring default. You should contact your specific lender if you have questions about delinquency vs. default, since lenders may handle this differently.

A direct deposit is an electronic transfer of funds via the ACH network directly into an account. Most employers use direct deposit to pay employees. Online lenders can also use direct deposit to transfer loan principal into a borrower’s checking account.

A loan agreement, like all contracts, must be signed to be valid and for the funds to be issued. Many lenders operate online and allow borrower to sign their loan electronically – this digital signature is called an “e-signature.”

A fixed interest rate is an unchanging rate charged on a loan. It can apply to the entire loan term or part of the term. A fixed interest rate stays the same throughout a set period.

An installment loan is a loan that is repaid in fixed installments. There is a predetermined loan amount and number of payments. However, many installment loan lenders will allow you to pay off debt faster without a penalty.

Interest is defined as the cost of borrowing money. It also applies to the money you may earn from savings.

Interest rates indicate the cost or return as a percentage of the amount you are borrowing or lending.

Some lenders charge a late payment fee when a borrower is late to make a payment. Lenders must disclose any late fees in the loan agreement. Some lenders provide autopay as an option, meaning payments are automatically drafted from a borrower’s checking account, ensuring that they do not miss a payment.

Articles on late fees can be found on the Uprova blog!

A lender is a financial institution or individual that makes loans directly to a borrower with the understanding and expectation they will be repaid.

A loan is money, property, or other goods given to another party in exchange for repayment of the loan value plus interest.

You can learn more about different types of lending through our blog posts.

A loan agreement is a contract that governs a loan that must be signed by the borrower before funds can be issued. It includes vital information about the loan including rates, fees, repayment terms and more. Lenders are required to show borrowers the loan agreement, and give them the opportunity to read it, before the borrower has to sign. It is very important that borrowers read and understand the loan agreement before signing.

A loan balance is the amount you have left to pay on a loan. Your balance can be different from your payoff amount – the amount you would need to pay on a given day to pay off your loan. Your loan balance can change from day to day because interest gets added to your loan balance regularly. You will carry a balance on a loan until it is paid off.

Money management refers to how you handle your finances. Money management can include creating (and following) a budget, managing debt, saving, paying taxes, investing, and planning for retirement.

In general, an offer is something that is presented by one party to another in the hopes that the second party will accept the offer. When you request funding from Uprova.com, Uprova will review your request and, if you meet underwriting requirement and other standards, provide you with an offer for a loan. You may accept this offer, but you are not obligated to do so.

Qualification usually refers to the standards that a borrower must meet to obtain a loan from a lender. These can vary from lender to lender, but typically include an age requirement (usually the borrower must be 18 years of age or older), a requirement that the borrower is employed or can show proof of income, U.S. citizenship, a working phone number, a bank account, and a minimum credit score.

A secured loan is one that requires some kind of valuable asset, known as collateral, as a condition of borrowing. Examples of a secured loan include car loans and mortgages. Personal loans are often unsecured loans.

An unsecured loan is a loan that is not backed by collateral. Unsecured loans do not require a borrower to secure the loan with assets in order to get funding. Unsecured loans are riskier for lenders than secured loans, so interest rates and fees may be higher than secured or collateralized loans. An online personal loan is one type of unsecured loan.

As opposed to a fixed interest rate, a variable interest rate is one that fluctuates or changes over time. A variable interest rate is usually based on an underlying benchmark interest rate or index that changes periodically.

Zero-based budgeting is a budgeting method that doesn’t include the previous year’s budget in setting a new budget – the new budget starts “from zero” and all expenses must be justified.

Learn more about zero-based budgeting here.