Payday Loan Glossary:
Annual Percentage Rate (APR): The cost of credit on a yearly basis, expressed as a
percentage. Required to be disclosed by the lender under the federal Truth in Lending Act,
Regulation Z. Includes certain up-front costs paid to obtain the loan.
Credit limit: The maximum amount that you can borrow.
Credit Reporting Agency: An organization that gathers, records, updates,
and stores financial and public records information about the payment records
of individuals who are being considered for credit.
Debt: Amount owed to another.
Delinquency: Failure to make loan payments on time.
Equal Credit Opportunity Act (EOCA): A federal law that requires lenders
and other creditors to make credit equally available without discrimination based on
race, color, religion, national origin, age, sex, marital status, or receipt of income
from public assistance programs.
Fair Credit Reporting Act: A consumer protection law that regulates the
disclosure of consumer credit reports by consumer/credit reporting agencies and
establishes procedures for correcting mistakes on one's credit record.
Fixed Rate: An interest rate fixed for the term of the loan. Payments
as well are fixed at one amount.
Gross Income: The income of the borrower before taxes or expenses
which are deducted and used for qualifying purposes.
Household Income: The total income of all members of a household. An
important yardstick used by lenders evaluating applications for joint credit.
Interest-Only Loan: An advance of money in which the installments pay only
the interest that accumulates on the loan balance. The loan balance does not decrease
with the payments. Sometimes the interest-only payments last for a limited period,
after which the monthly payment increases and the borrower begins paying principal in addition to interest.
Late Charge: A fee imposed on a borrower for not paying on time.
Lender: The company underwriting and offering the loan.
Line of Credit: A commitment to lend up to a specified maximum amount to a customer
for repayment under the terms of the agreement between the lender and the customer.
Loan Application: A document in which a prospective borrower details his or
her financial situation to qualify for a loan.
Payday Loan: A payday loan made generally until ones next payday, the amount
of money borrowed, the amount of money owed, and any fees are due next payday.
Rate: The annual rate of interest on a loan, expressed as a percentage of 100.
Truth in Lending Act: A federal law requiring a disclosure of credit terms using a
standard format. This is intended to facilitate comparisons between the lending terms of
different financial institutions.
Unsecured Loan: An advance of money that is not secured by collateral.
Verification of Employment: Confirmation that a loan applicant is telling the
truth about where he or she works and how much he or she makes.