You will hear and see many different terms when you are dealing
with payday loans. It is helpful to understand these terms before
doing business. The terms are as follows:
- Cap: the maximum allowable increase used for
either payment or interest rate, for a specified amount of time
on an adjustable rate mortgage. See Adjustable Rate Mortgages
for a complete guide.
- Payday loan: a loan made as a payday loan generally
until ones next payday.
- Ceiling: maximum allowable interest on an adjustable
rate mortgage over the life of the loan.
- Closing: the time and place at which all documents
for your loan are signed, dated and notarized.
- Closing costs: any fees paid by the borrowers
or sellers during the closing of the mortgage loan. This normally
includes an origination fee, discount points, attorney's fees,
title insurance, survey, and any items which must be prepaid,
such as taxes and insurance escrow payments.
- Credit limit: the maximum amount that you can
- Credit Repository: An organization that gathers,
records, updates, and stores financial and public records information
about the payment records of individuals who are being considered
- Adjustable rate: an interest rate that changes
periodically in relation to an index. Payments may increase or
- Annual percentage rate: 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 up-front costs paid to obtain the loan, and is, therefore,
usually a higher amount than the interest rate stipulated in the
mortgage note. It does not include title insurance, appraisal,
and credit report.
- Basis point: one one-hundredth of a percentage
point. The difference between 8.00 percent and 8.01 percent is
one basis point.
- Debt: amount owed to another.
- Delinquency: failure to make mortgage payments
when mortgage payments are due.
- 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 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. Usually the interest-only payments last for a limited
period, after which payments rise 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 bank, mortgage company, or mortgage
broker offering the loan.
- Line of credit: A commitment by a financial
institution to lend up to a specified maximum amount to a customer
during a specified period of time.
- Loan application: A document in which a prospective
borrower details his or her financial situation to qualify for
- Origination fee: The fee a lender charges to
process a loan. It usually includes the cost to prepare loan documents,
check a borrower's credit history, inspect the property and sometimes
conduct an appraisal.
- Payday Loan: A payday loan made generally until
ones next payday, the amount of money borrowed, the amount of
money owed, excluding interest, the client of a real-estate agent.
- 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.
© 2006 Payday Loan Information.